As demand grows, plants close
Leaner supply chain can't keep pace
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"It's beyond a trend; it's an epidemic," said Dan Sharkey, a suburban Detroit lawyer who works with many auto suppliers.
This week Chrysler Group expects to idle its Windsor, Ontario, minivan plant for at least a week because parts are scarce.
And Ford Motor Co. expects to reopen a suburban Detroit plant that builds the F-series pickup after a shortage of parts for V-6 engines forced a weeklong shutdown.
On Friday, Ford also closed its Kentucky Truck plant because of a parts shortage. That factory builds the F-series Super Duty pickups, Ford Expedition and Lincoln Navigator. As of late Friday the shutdown had not been scheduled to extend into this week, a spokesman said.
In Europe this week, Volkswagen AG will halt production at its main assembly plants in Wolfsburg, Germany, because of a shortage of engine parts.
Ford also took an additional week of downtime at its Chicago assembly plant -- which builds the in-demand redesigned Explorer -- before and after the traditional Christmas shutdown. Ford spokesman Todd Nissen said parts shortages there have ended.
The parts shortages already have had an impact on dealers. Jack Kain, who owns Jack Kain Ford near Lexington, Ky., says he has delivered only five Explorers, "but we could have sold 15 to 20 if we had the availability."
Many suppliers who cut capacity to the bone during the downturn either can't ramp up quickly enough or are gun-shy about adding equipment and workers amid the fragile recovery, industry observers say.
"I see tremendous capacity constraints throughout all tiers of the supply chain," said Sharkey, the Detroit lawyer. During the downturn, many suppliers were stung when customers' volume projections fell woefully short, Sharkey said. Now many subsuppliers in particular can't keep up as automakers and larger suppliers increasingly put in short-notice orders that far exceed original forecasts.
Tier 1 suppliers have had an easier time adjusting to the rebound in demand, said Bill Kozyra, CEO of TI Automotive and chairman of the Original Equipment Suppliers Association. "I would have no problem handling 14 or 15 million units of production tomorrow if that were to occur," he said.
One particular trouble spot: suppliers of electronic components. Many are Tier 2 suppliers for whom the auto industry is a small part of their business, said Lars Holmqvist, CEO of CLEPA, the European auto supplier association.
"When the crisis came in 2008-09, they didn't believe in the auto industry any more and closed some plants," Holmqvist said. "They are not keen to jump back in."
At Chrysler's Windsor plant, which makes about 1,500 minivans a day, about 4,400 workers on three shifts will be idled this week, said Rick Laporte, president of Canadian Auto Workers Local 444. He blamed shortages of multiple parts and raw materials. Laporte and another plant employee said aluminum materials from a Chinese supplier were among the problems.
Chrysler spokeswoman Jodi Tinson declined to comment.
The parts shortages are likely to make a tight vehicle inventory situation even worse. As of Jan. 1, for example, Ford dealers had a 57-day supply of F-150s, the lowest level since Sept. 1, 2009, according to the Automotive News Data Center.
Kain, the Kentucky dealer, says it already takes weeks to fill an F-150 truck order. He's had to ask customers to wait.
"We are short. Most dealers are," he said. "We have about 50 percent of the stock we'd normally carry."
Bradford Wernle, Jamie LaReau and Laurén Abdel-Razzaq contributed to this report
You can reach Mike Colias at mcolias@crain.com.
