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The Detroit Three auto makers suddenly can't make enough vehicles - a development that could benefit Canada and give the federal and Ontario governments the upper hand as the companies seek hundreds of millions of taxpayer dollars to redevelop Canadian vehicle assembly plants, documents obtained by The Globe and Mail show.
Chrysler Group LLC, Ford Motor Co. and General Motors Co. slashed so much production capacity during the 2008-2009 crisis that they have to rush now to restore it to respond to a strong sales recovery and forecasts that the North American market will be even more robust later in the decade.
"By 2018, capacity shortages are projected to be an issue for the Detroit Three," says a study done for the federal government by the Center for Automotive Research (CAR), an industry think-tank based in Ann Arbor, Mich., and obtained by The Globe and Mail.
The current shortage and the one looming near the end of the decade will make it difficult for the companies to close any more Canadian facilities and to persuade policy makers to step up with subsidies or see billions of dollars in auto investment directed elsewhere.
There are also implications for the Canadian Auto Workers union in crucial talks on a new contract this summer with the companies. The need to keep pumping out vehicles to meet robust demand means the companies will be less willing to risk a strike.
The production shortages even raise a glimmer of hope for a shuttered GM truck plant in Oshawa, Ont.
While each of the Detroit companies is adding production at U.S. plants, the CAR study indicates Chrysler and GM will run short of capacity to make pickup trucks and other full-frame vehicles by 2015, while Ford will need more capacity for passenger cars and crossovers - known as unibody vehicles - by 2018.
The CAR report, which was designed to assess the importance of the companies' Canadian factories to their North American operations, was submitted to the federal government on Feb. 27 and obtained through an Access to Information request by The Globe and Mail. Industry Canada refused to make public 21 pages of the 28-page study.
If forecasts that GM's sales will rise to 3.6 million vehicles by 2015 and 3.7 million by 2018 are correct, GM could lose market share because it won't be able to build enough trucks, the CAR study said.
"GM's Oshawa plants (including the idled Oshawa Truck) could each be candidates for full-frame investment or conversion," it said.
Ford has asked the governments for financial aid to build a global platform at its assembly plant in Oakville, Ont., a project worth more than $1 billion. The plant makes crossovers, the kind of unibody vehicles for which demand is rising.
Ford had said before the market turnaround that the project wouldn't go ahead without government support, and that if it was scrapped, the factory likely would have to close.
"I don't see them having the room, frankly, to shut another plant," said one industry source familiar with Ford's future production needs.
But keeping the factory open will likely still require help from the governments and the CAW, which will be under pressure to reduce labour costs.
The robust market that's causing the Detroit Three to add shifts and cancel summer shutdowns strengthens the union's position. Chrysler's plant in Brampton, Ont., for example, is the only factory assembling the Chrysler 300 and Dodge Charger and Challenger full-sized sedans.
Combined sales of the three cars soared 63 percent in the first four months of the year, so Chrysler could be reluctant to undergo a strike.
Auto makers eliminated 2.6 million units of production capacity between 2008 and 2011.
"If the U.S. market is coming back at 10 or 11 percent a year for the next three years, where are you going to make them?" asked one U.S. industry analyst.