June 1, 2006

North American auto production to hit five-year low in 2006

Southfield, Michigan – A confluence of factors will cause North American production over the year’s final three quarters to be the lowest for the period in 10 years, according to the latest report from Ward’s AutoForecasts.

A strong showing in the first quarter will keep the calendar year comparison a bit more favorable, but the outlook beyond that leaves calendar year output at 16.05 million, 1.6 per cent below 2005’s 16.32 million, and the lowest since 2001’s 15.82 million, says Haig Stoddard, Manager Industry Analysis for Ward’s Automotive Group, publisher of Ward’s AutoForecasts.

Lower demand for North American-built vehicles is the primary reason for the production slowdown. Adding fuel to the fire are slowdowns for the market’s two biggest automakers, General Motors and Ford. Both have been particularly hard hit by the market shift away from midsize SUVs. To shore up profit margins, both have cut back on incentive spending and sales to rental fleets. Additionally, the two have cut production capacity through plant closures and shift reductions at selected facilities. GM will be cutting more capacity in the third quarter, when it eliminates third-shift output at three plants.

Another factor limiting North American production is increased sales of imported vehicles. Through April, North American sales of imported vehicles increased 1.8 per cent over year-ago, while domestically produced cars and trucks declined 0.4 per cent. Import share of the total market is 21.6 per cent, which would be the highest since 22.3 per cent in 1989 if that mark holds for the year.

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