Thanks to a rush of orders from automakers, suppliers are cranking up production in North America.
Feeling more confident about the next few years, suppliers are hiring and adding machinery and production lines, and even building plants. The extreme caution that followed the Great Recession of 2008 and 2009 is dissipating.
Don Walker, CEO of Magna International Inc., says his company is getting bigger orders from Chrysler Group, Ford Motor Co. and General Motors.
"We are flat-out at our plants in North America on some products," Walker told reporters last week at the Geneva auto show.
BMW, Volkswagen and Mercedes-Benz also are boosting orders, he said. "The export demand for those brands is much higher than planned, and we are trying to meet demand."
According to a January survey of 109 suppliers by the Original Equipment Suppliers Association, 64 percent of respondents said they were optimistic about their outlook for the next 12 months, up from only 27 percent in a November survey.
For GKN PLC of the United Kingdom, the tipping point came in December, when U.S. sales were much stronger than expected.
GKN's factory in Celaya, Mexico, was struggling to meet growing demand for constant-velocity joints, which allow the drive shaft to transmit power to the wheels.
GKN, which makes CV joints mostly for front-wheel-drive vehicles, decided to get around the problem of limited capacity in North America by producing some CV joints in Europe for shipment to North America.
"We made the decision at the tail end of last year," said Max Owen, president of GKN Driveline Americas. "We were working at the limit of our capacity."
Production in Europe buys time for GKN to expand its North American plants, Owen said.
In May, the Celaya complex will begin operating a new forge. By 2015, Celaya will produce 9 million CV joints a year, up from 3 million in 2005. GKN's plants in North Carolina and Ohio also are producing close to capacity, Owen said. "We are adding capacity across the board. There isn't a single product line that isn't growing strongly," he noted.
Owen says GKN will meet rising demand in North America, but he fears the industry may suffer spot shortages.
"I believe there are going to be bottlenecks," Owen said. "No supplier wants to be the weakest link, but there's always one. If U.S. sales stay at 15 million units, the plants will be challenged."
In February, the seasonally adjusted annual sales rate in the United States reached 15.1 million units, up sharply from the industry's low point in February 2009, when it was 9.3 million.