Pushing plants to pump up output

DETROIT -- With stocks of popular vehicles dwindling, carmakers are wringing all the capacity they can out of their plants. It's a startling about-face for an industry that spent the last few years stripping out excess capacity.

"We've got several plants that are running at maximum capacity. It's our job to figure out how to get capacity up" without adding more bricks and mortar, says Jim Tetreault, Ford Motor Co.'s vice president of North America manufacturing.

Chrysler Group, once the poster child for building too many cars and selling them with profit-eroding discounts, eliminated the two-week summer break at four of its nine North American assembly plants after stocks of several popular vehicles fell below 40 days by the end of April. Two other plants will get one week off, not the traditional two.

Ford trimmed shutdowns to one week at six of its eight North American assembly plants. In a manufacturing juggling act, it will add a third shift at three of the plants this summer as it simultaneously launches redesigned models at those factories.

Ford says the change will allow it to build nearly 40,000 additional vehicles this summer.

Hyundai Motor Co. also is adding a third shift at its Montgomery, Ala., plant, which builds the Sonata and Elantra. As of May 1, Hyundai dealers had a scant 21 days' supply of cars, according to the Automotive News Data Center.

"We're kind of describing a new normal here. This is second year in a row we've done it," Tetreault (TAY'-troh) says, referring to the shortened shutdowns.

Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich., says the industry is waking up to all the production capacity it lost during the downturn.

"We really, really cut back on capacity," he says. "Thirty major plants shut down just in the United States from the Detroit 3. Throw in two more Canadian and that's 32, over 3 million units of capacity. Did we cut too far?"

North American auto factories are running at an average 87 percent of straight-time capacity, IHS Automotive data show. In 2011, all North American factories averaged 78 percent of their capacity; in 2010 it was 72 percent, the consulting concern says.

General Motors says its North American plants, with extensive overtime, operated at 103 percent of straight-time capacity in the first quarter, compared with 97 percent a year earlier.

Tracy Handler, a production analyst for IHS Automotive, says carmakers are being creative as they try to avoid building new plants. "We're seeing more manufacturers going to that three-crew process like Chrysler at Belvidere to use the capacity they have to the fullest extent," she says.

Ford is even eliminating mass breaks at several plants with what's called a "tag relief" system. Instead of halting the line for 15 minutes so all employees can take a break at the same time, Ford hires extra employees to sub for those who go on break, so the line keeps running.

At Ford, the third-shift crews will be staffed predominantly by new hires, who are younger than their legacy counterparts, Tetreault, 56, says. For example, the average age of new hires in Chicago is 25, he says. "Chicago has never built automobiles on three shifts before. We're hiring people off the streets who have never built an automobile," he says. The Chicago plant builds the Ford Explorer, which had a modest 43 days' supply as of May 1.

"We haven't been hiring much for the last 20 years," Tetreault says. "We weren't in a growth spurt. In fact, it was the opposite situation. We were downsizing the company."

With capacity shortages a reality, some carmakers may have to think about building new plants. McAlinden says: "Whoever goes first on capacity additions will win a great prize. They're all looking at each other."

Ellen Mitchell and Mike Colias contributed to this report