The Detroit Three auto makers, which downsized dramatically by closing dozens of factories during the 1990s and 2000s, are almost reaching the point where they need to open new vehicle assembly plants.
While they report healthy profits because of deep cost cuts made during the downsizing and what is now a solid recovery in North American sales, Chrysler Group LLC, Ford Motor Co. and General Motors Co., are staring at analysts' forecasts for an even more robust market later in the decade.
If those predictions are borne out, the three companies will be prowling for new sites for plants to build cars, trucks and crossover vehicles. At the moment, the strength of the recovery means plenty of overtime for auto workers in Canada and the creation of jobs at a Ford plant in Oakville, Ont., that have been offered to workers laid off from other Ford plants during the downturn.
"We are getting close in North America to our full capacity," said Joe Hinrichs, Ford Motor Co.'s Americas division President. "We're looking forward to continued growth especially in the U.S. auto industry [which] could drive some further need for capacity."
That doesn't mean Ford is hastening to build new plants, Mr. Hinrichs cautioned, because there is still some nervousness about the global economy and Ford has several factories where the work force can be expanded to three shifts from the current two.
Chrysler has quietly taken steps toward increasing capacity, although not yet on the vehicle assembly side of the business. The company has purchased an empty factory in Tipton County, Ind., that is expected to produce transmissions.
"This is the first example we've seen of new bricks and mortar" since the recession, said Kim Hill, director of sustainability and economic development standards of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.
The increase of 14 per cent in U.S. sales last year to 14.5 million vehicles has the industry in a positive mood as the North American International Auto Show opens in Detroit on Monday.
Analysts are forecasting an even better year this year and a further improvement in 2014 and beyond.
"We expect the SAAR [seasonally adjusted annual rate] to get back to and eventually surpass its prior peak level of 17 million units around 2015-16, as significant amounts of pent-up demand is unleashed," auto analysts from Wall Street firm Morgan Stanley said in a report last week.
Such positive forecasts underpin the view that the Detroit Three will need to add factories later this decade.
The typical measure of an assembly plant's capacity is two shifts of workers who build vehicles for eight hours a day.
But Ford has added third shifts or third crews to several of its plants, which has pushed its capacity utilization well above 100 per cent. Jim Tetreault, Ford's vice-president of North American manufacturing, said in November that the company's plants were running on average at 114 per cent of capacity.
In the middle of 2012, Chrysler and GM were also in the 100-per-cent range, said Ron Harbour, senior partner in charge of global automotive manufacturing for consulting firm Oliver Wyman. At the same time, about 40 per cent of the three companies' plants in North America were running on three shifts or with three crews that kept plants running for 120 hours a week instead of 80.
"We've never seen it that high," said Mr. Harbour, who believes the companies will squeeze every possible vehicle out of existing plants before adding capacity.
"The general philosophy is more with less. So they will add more shifts, they will run overtime, they will do everything before they reopen a plant or build a new plant," he said.
That lesson was learned before and during the recession and the auto industry crisis of 2008-2009.
In 2007, the last year before the crisis, the three companies had capacity to build 10.53 million vehicles, but assembled just 9.14 million. That excess capacity was the equivalent of more than five assembly plants.
Chrysler and GM operated at 88 per cent of capacity that year, while Ford's plants ran at 84 per cent.