Car industry will stay lean and mean, but good times loom

RP news wires, Noria Corporation
Tags: lean manufacturing

So-called normal sales of new cars in the USA won't return until 2012, a conference in Detroit heard this week. And tight inventory levels, which have saved Ford alone some $1.5 billion worldwide so far this year, will remain the challenge for logistics providers as well as carmakers.


U.S. sales next year are forecast up 5 percent on this year at 11 million, but that's a long way from the 16 million for 2007 at the height of the boom. Current inventory of stock is as low as 30 days, which compares to a “normal” 70 to 80 days and a blow-out level of 120 days back in January.


These and other high-level analyses were being discussed at the annual Automotive Logistics Global conference attended by senior executives from carmakers and their logistics service providers. The savings at Ford were revealed by the company's global head of manufacturing, Jo Hinrichs, while the sales predictions came from industry analyst JD Power.


Executives from General Motors, Ford, Toyota, Nissan, Chrysler and others stressed that the sharp changes in operating practices brought by the downturn are here to stay.


"This is definitely a permanent change [toward lower inventory]," said Susanna Webber, executive director for global logistics at GM. "On the material side it is driving us to be smarter and faster, with a leaner approach."


Chrysler's manager for worldwide vehicle transportation, Steve Tripp, warned: 'If you [finished vehicle logistics providers] aren't close to our production schedules, then get very close to them."


Noted Nissan North America's Mike Steck, vice president for supply chain management. "I'm not sure that a day goes by when I don't speak with our sales and marketing team," he said. "We've all had to adjust to be more flexible in manufacturing."


Despite U.S. production being down at 8.5 million units this year, from 12.5 million last year, the car makers should be bullish about the medium term, according to Dr. David Cole, chairman of the Center for Automotive Research. He told the conference that the structural, labor and inventory changes being made could lead to the most profitable period for carmakers since just after World War II, with lower legacy costs and fewer purchase incentives.

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