Ford will focus on Focus, says President Mark Fields, as it boosts third and fourth-quarter production.
In an industry where bad news has become the norm, something unexpected is happening.
For more than a year now, automotive manufacturers have, with only the rarest exception, done nothing but cut, cut, cut. But as Washington prepares to wrap up the unexpectedly successful Cash-for-Clunkers program, next Monday, the industry has begun to realize it may have cut too much. And with inventories down so low that some popular models are literally being sold right off the car haulers, a growing number of automakers are suddenly starting to ramp up production again.
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Perhaps the most notable on the list is General Motors, which emerged from Chapter 11 bankruptcy protection, barely six weeks ago. Despite widespread skepticism about the federal bailout that saved the maker, GM is bringing back 1,350 laid-off workers – and putting another 10,000 on overtime – to bump up its third and fourth-quarter production schedules by an added 60,000 units.
“Our dealers are clamoring for more products,” said the company’s vice president of North American sales, Mark LaNeve. GM was one of the top sellers under the Clunkers program.
The federally-funded effort, formally known as the Car Allowance Rebate System, also did well for Ford, which scored big with its small Focus and Escape models. The company was actually one of the first to see an opportunity to ramp up assembly operations during the third quarter but will now boost an earlier increase by another 10,000 cars, trucks and crossovers, while adding 141,000 during the final three months of 2009.
“We already had planned to increase third-quarter production by 16%, and now that’s going to 18%, with a focus on Focus, no pun intended,” Mark Fields, Ford’s President of the Americas, told TheDetroitBureau.com, adding that, “As inventories go down, production will go up.”
The good news isn’t limited to the U.S. Many makers in China have been cautiously increasing their output in what is one of the only major world markets to show some life, in part due to government stimulus programs.
In Japan, Toyota has announced it will add another 150,000 vehicles to the global production schedule it had last revised in May, including products marked for U.S. showrooms. As of now, the Japanese giant, which pushed past GM to become the world’s largest car manufacturer, in 2008, hopes to produce 5.95 million cars, trucks and crossovers.
The modest and still tentative turnaround is impacting manufacturers large and small. Mazda’s U.S. arm has been another beneficiary of the Clunkers program, noted the subsidiary’s CEO Jim O’Sullivan, in an interview with TheDetroitBureau.com.
“We’re totally out of Mazda 5s and running out of Mazda 3s,” he said, adding that many dealers are selling the bigger vehicle as soon as delivery trucks reach their showrooms.
But O’Sullivan also touched on the reason why the industry isn’t going even further, what with inventories so heavily depleted. “There will be some payback,” he warned, referring to the likelihood that at least some buyers who purchased using Clunkers cash would’ve gone into showrooms later in the year had Congress not enacted the program.
Other manufacturers echo O’Sullivan’s concerns and suggest they would rather run lean until they are sure that the market really is on a long-turn rebound, one strong enough to justify a continuing increase in production levels. The alternative would be to ramp up plants now and risk trimming back or even closing some of them later in the year.
Excess capacity could also force manufacturers to boost costly incentive programs that have helped plunge them deep into the red during this recession. That’s a mistake few are willing to repeat.