Flush with cash and fat order books, North American suppliers are increasing capital expenditures, hiring workers and raising funds for possible acquisitions.
According to a survey last month by the Original Equipment Suppliers Association, 47 percent of suppliers are more optimistic about their business prospects for the next year; just 6 percent are more pessimistic.
"The optimism is driven by greater confidence in North American production forecasts, particularly with the rebound in vehicle sales after the first quarter," the report noted.
Suppliers expect to back up their enthusiasm with bigger budgets for the next fiscal year:
- Seventy-four percent of suppliers will increase capital investments; 8 percent will reduce them.
- Sixty-seven percent will spend more on product innovation; 1 percent will spend less.
- Eighty percent will hire more hourly workers; 7 percent will reduce their payroll.
The association drew its results from a July survey of 93 suppliers.
Suppliers are optimistic because automakers are telling them to gear up for more production. Bob Young, Toyota's North American purchasing chief, told Automotive News that Toyota has begun sharing 36-month production forecasts to help suppliers make investment decisions.
"We anticipate [setting a production record] this year and the following year," Young said in a July 25 interview. "We'll outpace the market, so we need very strong collaboration with our suppliers to do this successfully."
Industry analysts share Toyota's expectations. In May, IHS Automotive predicted that North American light-vehicle production would exceed 16.8 million units this year, rising to a record 17.5 million vehicles in 2016.
With prospects for record production looming, fewer suppliers are trying to hedge their bets. Survey respondents listed plant expansions as their fourth-highest priority, edging out the hiring of temporary employees.