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The Honolulu Advertiser
Posted on: Tuesday, January 12, 2010

U.S. automakers see signs of hope with rise in demand

By Tom Krisher
Associated Press

Hawaii news photo - The Honolulu Advertiser

General Motors, which makes the Chevrolet Aveo, above, said it may reopen some shuttered factories.

DANIEL ACKER | Bloomberg News Service

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DETROIT The vital signs are improving for American automakers.

General Motors may reopen some shuttered factories because it can't produce four of its vehicles fast enough to meet demand, and Chrysler is set to hire more engineers and product development workers.

While both companies still depend on government help, the moves are signs of increased confidence that the U.S. auto market bottomed out last year and will improve in 2010, even without a jolt from a Cash for Clunkers-style program.

GM factories making the Chevrolet Equinox, GMC Terrain and Cadillac SRX, all SUV-like crossovers, and the Buick LaCrosse sedan are at or near capacity, GM's North American president, Mark Reuss, told reporters yesterday at the Detroit auto show.

The company will try to squeeze more production out of its existing plants first, Reuss said. He mentioned an idled factory in Spring Hill, Tenn., as a possibility for reopening. GM has closed 14 factories in the past two years.

The head of Chrysler, Sergio Marchionne, said his company does not have enough people to revamp its U.S. product line and soon will start hiring, probably beginning with temporary workers.

"We just don't have the manpower," he said. "We are going to increase heads."

Michael Robinet, an auto industry analyst for the CSM Worldwide consulting firm near Detroit, said Chrysler's former owners cut the engineering and design staffs too far for the company to compete.

Both need to add factory capacity to take advantage of hot-selling models because these days competitors can adapt quickly.

"You have to make hay in the sunshine," he said. "These days, within a year or 18 months you can have competitors with products as good as yours, if not better."

GM and Chrysler both entered and exited bankruptcy in 2009, when Americans bought the fewest cars of any year since 1982. In all, U.S. sales of cars and trucks totaled 10.4 million, roughly 700,000 of them with the help of the government's Cash for Clunkers rebates.

Sales were down 21 percent for last year but up for December, giving the companies hope of gradual improvement this year.

GM Vice Chairman Bob Lutz said GM has lost market share over the years because it has been afraid to raise factory output when it has hot models.

Lutz was the head of product development for Chrysler in the 1990s. He said that company doubled its market share in a few years by immediately cranking up factories to make more of the cars and trucks that were selling well.

He recalled a recent management meeting at GM in which executives suggested holding production steady, even for hot-selling products, for fear that sales would wane and GM would be stuck with unused factories and workers.

"This is why we have never been able to gain share because we won't roll the dice and go with our winners," Lutz remembered saying.

Among the winners now are the Equinox and Terrain, both crossover SUVs equipped with four-cylinder engines that can get up to 32 mpg on the highway. GM had only a 13-day supply of the Equinox and 18 days' worth of Terrains at the end of December.

Besides the Spring Hill plant, GM has also placed its Janesville, Wis., factory on standby.

In Chrysler's case, Marchionne said the timing of hiring more production workers will depend on whether and when the company meets its sales projections. Its former owners, Cerberus Capital Management LP, cut white-collar jobs through layoffs, buyouts and early-retirement offers.

Marchionne also said Chrysler has maintained the $5 billion in cash reserves that it had in November, despite a year in which sales dropped 36 percent.

He pledged Chrysler will not produce too many cars and discount them simply to boost sales numbers. The company, he said, wants to sell at a profitable level but still plans to double U.S. and global sales by 2015.

He said Chrysler's new owner, Fiat Group SpA, which has only been running the company for seven months, is already putting out higher-quality vehicles. The best way to change the public's perception of poor quality is to produce better vehicles, Marchionne said.

"The only thing you can do is shut up, work very hard to get the issues resolved," he said.

At GM, Reuss said if he does his job correctly and restores faith in the GM brands, the company could hire workers again. The company now has about 7,500 workers on layoff.