DETROIT -- Production increases planned for the first quarter by General Motors Co. and Ford Motor Co. are giving hope to the depressed auto parts sector.
The production increases will mean employee recalls and better use of parts machinery now only partially used, said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit.
GM is forecasting a 75 percent increase over the year-ago period in first-quarter North American production, to 650,000 vehicles. Ford predicts a 58 percent increase to 550,000 over the same period.
That would be a dramatic change from a stifling production environment this year that saw North American vehicle production plunge nearly 40 percent, De Koker said.
More than 20 auto suppliers have filed for protection from creditors in U.S. Bankruptcy Court this year, according to a list compiled by Automotive News. This figure does not include smaller companies or operations that went out of business without seeking bankruptcy protection. Several large Tier 1 suppliers, including Visteon Corp., Lear Corp. and Cooper-Standard Holdings Inc., were among the casualties.
Suppliers continue to have a tough time getting banks to loan them working capital to increase production, De Koker said. The demands may push additional suppliers to ask automotive customers to pay for parts quicker than the traditional 60 days or, in some cases, request that customers buy materials for suppliers, he said.
Takata Corp. spokesman Alby Berman said the suburban Detroit safety system supplier is “taking a cautious view for the first quarter of 2010 as the present sales rates do not merit production increases.”
Unemployment rates are still high and credit remains tight, and that drives down consumer confidence, he said. “We are very cautious.”
Cheryl Kilborn, a spokeswmoan for Robert Bosch LLC, said the “increased schedules from Ford and General Motors are positive signs that the industry may be in the process of recovering.”
As for coping with a possible production spike, she said Bosch is prepared to address the increases in production levels. She added: “In some of our plant cities we have done an appropriate level of temporary hiring to address increases in production schedules.”
Tim Manganello, CEO of BorgWarner Inc., said first quarter production rates look similar to fourth quarter 2009 production rates. “We expect sales to slightly increase quarter on quarter throughout 2010."
BorgWarner does not foresee any issues meeting first quarter production, he said.