Planners at the world’s second-biggest automaker General Motors (GM) and a host of corporations across America are in no rush to make big new investments to ramp up output and hiring.
GM at the same time have not reopened its idled plants or built new ones as Americans rein in spending. Nonetheless, US automakers believe demand will return eventually to more normal growth levels.
With the US economy still struggling to regain momentum after the financial crisis of 2007-09 and 14 million Americans out of work.
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 US sales chief Don Johnson said.
Each month, a dozen executives of General Motors Co gather on the 39th floor of their Detroit headquarters to survey the auto industry, the US economy and how they will meet demand from customers.
Recently, the view has not been impressive.
Like many US manufacturers, it is squeezing more from existing factories and using time-honoured 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,” Johnson said.
The caution among many top US corporations echoes that of Federal Reserve Chairman Ben Bernanke and other policymakers, who are scaling back their expectations of economic growth.
With unemployment stuck above 9 per cent and surveys of manufacturers showing, at best, modest optimism for the months ahead, Bernanke has sounded less sure about when the expected pickup in the pace of recovery will kick in. Reflecting the downturn, heavy machinery maker Caterpillar Inc 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 US conglomerate, General Electric Co, said its core US revenues fell 2 per cent in the second quarter of 2011, and Ingersoll Rand Plc said this week that US 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.
From / Gulf today