July 22, 2011 – By Clare Baldwin
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Recently, the view has not been impressive.
With the economy still struggling to regain momentum after the financial crisis of 2007-09 and 14 million Americans out of work, the planners at GM and a host of corporations across America are in no rush to make big new investments to ramp up output and hiring.
The world's second-biggest automaker has not reopened its idled plants or built new ones as Americans rein in spending.
Like many U.S. manufacturers, it is squeezing more from existing factories and using time-honored efficiency boosts such as adding to overtime and eliminating plant bottlenecks.
"Our manufacturing folks have been tremendous at squeaking out extra units through improving line rates, adding on extra shifts," GM's U.S. sales chief Don Johnson said.
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Reflecting the downturn, heavy machinery maker Caterpillar Inc <CAT.N> on Friday announced results that fell short of expectations. Much of the higher demand it expects in the rest of 2011 is likely to come from outside the United States.
The largest U.S. conglomerate, General Electric Co <GE.N>, said its core U.S. revenues fell 2 percent in the second quarter of 2011, and Ingersoll Rand Plc <IR.N> said this week that U.S. consumers bought fewer home air conditioners and locks.
With a deadline looming to avoid a default, questions about whether Congress can raise the country's debt ceiling also are fueling concerns.
For automakers and dealers, high gasoline prices are also a constant factor.
"People are so sensitive to the price of fuel, if it spikes like it did earlier this year, it can have quite an effect on either keeping people out of the market or causing them shift their preferences on product," said John McEleney, a Clinton, Iowa, GM and Toyota dealer.
INCREASE OUTPUT, BIT BY BIT
Concern about the U.S. economic outlook is a big factor for Hyundai Motor Co <005380.KS>, which has resisted committing to building a second U.S. plant for its Hyundai brand despite running up against capacity concerns at its current factory.
"There's no big, simple silver-bullet solution. We're not going to pull the trigger on a big capacity increase, so it's got to be just a continued number of small, incremental improvements," Hyundai Motor America Chief Executive John Krafcik said earlier this month.
"Jobs are still an issue, housing is still a big issue and I don't think that's talked about enough in the context of our industry," he told reporters at Hyundai's technical center outside Detroit.
"When people don't have home equity, it's often very difficult for them to pull that trigger and buy a new car."
Auto sales in May and June fell short of expectations of economists and producers -- below an annual rate of 12 million vehicles in both months and lagging the 13-13.5 million sales GM and Ford have predicted for the year. They were also far short of the 17.4 million at the peak of the industry in 2000.
The pace of sales in June was the lowest in a year, hurt in part by the knock-on effect of Japan's earthquake and tsunami disasters in March, which hit supply chains.
Ford Motor Co's <F.N> global marketing and sales chief Jim Farley said Ford was not making big bets on production even though it sees a pick-up in the second half of the year.
"The business replenishment is pretty encouraging to us because that implies that although it may not be jobs yet, the hard assets are being replaced if it makes sense (and) if you offer them better fuel economy," he said.
For now, bets on growth are being placed elsewhere.
Jeff Stafeil, chief executive of auto parts maker Dura Automotive Systems, said his company's immediate growth opportunities lie in developing economies. The firm recently opened a factory in India to meet local demand.
Nonetheless, U.S. automakers believe demand will return eventually to more normal growth levels. Auto industry officials say pent-up demand from businesses and people with aging vehicles will keep the industry going until the recovery strengthens.
"There's probably enough pent-up demand to keep us going at this rate for at least another 12 months, by which time we would fully expect the underlying fundamentals of the economy to really start kicking into gear and having those fundamentals drive the industry further," GM's Johnson said.
(Additional reporting by Ben Klayman in Detroit and Nick Zieminski in New York; Editing by William Schomberg and Dan Grebler)