Foreign auto makers will out-produce the Detroit Three in North
America by 2012, meaning even more changes are coming for
struggling auto suppliers, said auditing firm Grant Thornton LLP in
a new reporting looking at suppliers.
As such, the company says suppliers will need to increasingly
sell themselves to European- and Asian-based auto makers while the
auto-supply industry shakes out from necessary consolidation and
deleveraging.
Grant Thornton said many suppliers may need to use bankruptcy to
fix their balance sheets - some have already begun to do so - while
ensuring they are well-diversified on a customer, geographic and
product basis.
The report comes after months of production cuts by global auto
makers who have been battered by sharply contracting demand for new
cars as consumer confidence waned and credit markets turned sour
amid the financial crisis. Suppliers which are strongly dependent
on Detroit have suffered along with those auto makers. But some
analysts now see auto-production rates picking up in the second
half of the year - albeit slowly, as economic woes persist.
By 2012, General Motors Corp. (GMGMQ), Ford Motor Co. (F) and
Chrysler Group LLC are expected to have their North America
assembly capacity reduced to 7.5 million units, down 35% from 2008.
All other auto makers combined will increase capacity by about 20%
in the region to more than eight million units.
German auto makers Volkswagen AG (VLKAY) and BMW AG (BMW.XE)
have announced plans to double their combined capacity in North
America - that would add 500,000 potential vehicles. Meanwhile,
Toyota Motor Corp. (TMC), Honda Motor Co. (HMC), Nissan Motor Co.
(NSANY) and Hyundai Motor Co. (005380.SE) will expand their
combined capacity by 20%, or nearly one million units.
Capacity use in North America should approach 90%, up from the
75% historical rate, assuming an annual sales rate of 15 million
units in the U.S. for 2012. This year's depressed sales rate is
expected to be about 10 million.
"In light of the dramatic restructurings that will occur over
the next several years, North American suppliers have important
strategic decisions to make, and the strategy must be defined and
implemented quickly," said Kimberly Rodriguez, co-leader of Grant
Thornton's automotive practice.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com