A year ago, Fitzgerald says, nobody in the automotive industry was even thinking about the potential for a U.S. recession.
This year, CSM Worldwide in suburban Detroit forecast that production of cars and light trucks in North America will fall to about 15 million, down from 15.3 million in 2006 and 15.8 million in 2005.
Next year, North American production could fall to around 14.6 million to 14.7 million, according to CSM.
During its third-quarter conference call, TRW Automotive Holdings Corp., of suburban Detroit, warned that the Detroit 3 could begin cutting vehicle production before year end.
"The Big 3 in North America are focused on inventory management," TRW CEO John Plant said in October during a conference call with analysts. "At this point, we are monitoring production really closely and are prepared to react quickly to minimize the profit impact in the fourth quarter."
Joe Langley, senior analyst for North American forecasting at CSM Worldwide, says the drop in production is more serious than the small percentage might suggest. That's because the numbers mask a tremendous change that has occurred in recent years as the Detroit 3 have cut production, and Asian automakers with plants in North America have increased output.
On the other hand, Langley sees a long-term benefit from lower production.
"It's a change in the infrastructure in what's going on in North America," he says. "You have a lot of excess capacity and labor costs that drove production for the Big 3, and now you are starting to see them taking out capacity and really focusing on quality volume rather than just market share volume."
Michael Robinet, vice president of forecasting for CSM Worldwide, says the production cuts by General Motors, Ford Motor Co. and Chrysler LLC are due in large part to labor agreements passed by the UAW this fall.
"It needed to take place five years ago, but now they have a labor contract that allows them to make the changes," Robinet says.
Chrysler's announcement last month that it will cut four vehicles from its lineup in 2008 is an example of that newfound flexibility, he says. Chrysler said it would cut the Dodge Magnum, Chrysler PT Cruiser convertible, Chrysler Pacifica crossover and Chrysler Crossfire coupe and roadster.