How many cars can US build? Too many
Despite closing roughly a dozen automotive body and assembly plants in recent years, the automobile industry in the United States may still have more carmaking capacity than it needs. By 1993, according to a new study, the Big Three carmakers will have at least 3 million units of excess capacity. This will put mounting pressure on these companies to close more of their factories, even as foreign-owned ``transplants'' expand their US assembly operations.
``By 1993, we see nine new assembly plants being added,'' says William Pochiluk, chief analyst at Autofacts Inc., a Paoli, Pa., newsletter.
The list of new auto and light truck plants includes a domestic facility, the billion-dollar replacement for the Chrysler Corporation's aging Jefferson Avenue assembly line in Detroit. But most are new Japanese-owned transplants, including the Toyota Motors plant under construction in Kentucky and the Fuji-Isuzu joint venture in Indiana.
In fact, Mr. Pochiluk believes that the Japanese have not completed all their plans for North America and that several of their new plant projects have not yet been announced.
Much of their emphasis, he believes, will be on vehicles classified as light trucks, including pickups, mini-vans, and multipurpose vehicles such as the Jeep-like Suzuki Samurai .
(The ``crossover market,'' where buyers choose the more versatile light trucks over cars, is the only real growth area of the US vehicle market.)
At least one Japanese carmaker, Honda, has said it may order another expansion of its US production facilities if its output can be supported by market demand. Honda would most likely increase capacity by doubling the production of its soon-to-be-completed second assembly line located in central Ohio.
With the addition of those factories, North American light vehicle production capacity would reach 15.6 million units by 1993.
But the Autofacts study forecasts that sales volume will average only about 12.3 million units a year, leaving at least 3 million units a year of over capacity.
As a result, Pochiluk predicts, ``We see at least 10 plants going away.''
Domestic manufacturers are likely to feel the brunt of that shakeout. According to the Autofacts study, Chrysler will likely close its Jeep plant in Toledo (which will be replaced by the re-designed Jefferson Avenue plant), and a Canadian van plant.
Despite its booming sales, Pochiluk believes the Ford Motor Company will also close two of its assembly lines, in part because the company is now sourcing 160,000 vehicles a year from a new Michigan plant operated by its Japanese affiliate, Mazda Motors.
The two Ford factories that are considered most vulnerable are in Edison, N.J., and Dearborn, Mich.
General Motors has at least five plants in jeopardy, including two that are building midsize vehicles in Framingham, Mass., and Ste. Th'er`ese, Quebec; two subcompact plants in Leeds, Mo., and Janesville, Wis.; and a large-car plant in Lakewood, Ga.
Of the foreign-owned transplant facilities, only one is on Autofacts' danger list, the newly acquired Hyundai assembly line in Canada.
Pochiluk questions whether the South Korean carmaker will be able to market a midsize vehicle up against increasingly stiff competition from better-established Japanese and domestic automobile manufacturers.
The potential glut may be bad news for automakers, but it could be good news for American car buyers, since the excess capacity could lead to a continuation of rebates, discounts, and other sales incentives as competing manufacturers struggle to maintain sales levels and keep their plants running as close as possible to full capacity.