North American Auto Production to Hit 5-Year Low in 2006

SOUTHFIELD, Mich., May 31, 2006 -- 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.

Fortunately, a strong showing in the first quarter will keep the calendar year comparison a bit more favorable, with total 2006 output at a 5-year low.

Production in the first three months totaled 4.29 million units, compared with 4.09 million in first-quarter 2005, and the highest for the period since 4.8 million in 2000.

But the outlook beyond that leaves calendar year output at 16.05 million, 1.6% 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.

The final nine months of the year will fall to its lowest aggregate level since 1996. April-December output will total 11.76 million, compared with 1996's 11.64 million.

That is 4%, or some 463,000 units, below the 12.22 million vehicles built during like-2005 and more than 10% below the period's record 13.13 million units in 1999.

Lower demand from year-ago 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 auto makers, General Motors Corp. and Ford Motor Co. 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.

Product-cycle timing also will play a role by forcing production interruptions that will negatively impact output. The Big Three all have plants scheduled for major retooling efforts in the latter half of the year, particularly GM, which will begin the changeover to its all-new GMT900 fullsize pickups.

GM and Ford's available straight-time output for the year will fall by nearly 500,000 units compared with 2005. In spite of this, industry capacity as a whole will drop by just 100,000 units from prior-year due to increases by most of the remaining manufacturers.

The industry will have available straight-time output of 17.75 million units in 2006, well above what actually will be produced.

Another factor limiting North American production is increased sales of imported vehicles.

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

Ward's AutoForecasts details forecast North American production by manufacturer, plant, platform and vehicle line, and is a product from Ward's Automotive Group. It draws from our extensive automotive database and from the many experts employed at Ward's for our news, data and analysis services.