Good vital signs: GM mulls restarting idled plants to meet demand; Chrysler to hire engineers

Vital signs improving for Detroit’s automakers

DETROIT — The vital signs are improving for Detroit’s automakers.

General Motors Co. may reopen some shuttered factories because it can’t produce four new vehicles fast enough, and Chrysler is set to hire more engineers and product development workers as both companies foresee improved U.S. auto sales this year.

Mark Reuss, GM’s North American president, told reporters at the Detroit auto show Monday that factories building the Chevrolet Equinox, GMC Terrain and Cadillac SRX crossover vehicles and the Buick LaCrosse sedan are at or near capacity and can’t satisfy demand.

Chrysler CEO Sergio Marchionne, who also serves as CEO of Italian automaker Fiat Group SpA, said his company doesn’t have enough people to revamp its U.S. product line and soon will be hiring temporary and other workers.

Both moves are signs of increased confidence that the U.S. auto market bottomed out last year and will gradually rise in 2010. They also indicate general economic improvement nationwide.

Overall, U.S. auto sales fell 21 percent in 2009, a year that saw both GM and Chrysler enter and exit bankruptcy protection when they ran out of money. Both companies are receiving government aid.

But sales were up 15 percent in December over the same month last year, giving automakers hope of a gradual improvement this year. Industry analysts predict that automakers will sell roughly 1 million more vehicles this year than last.

Reuss mentioned an idled factory in Spring Hill, Tenn., as a candidate for reopening, but stopped short of saying any plants would be restarted.

He will meet with GM’s manufacturing and sales executives next week to see if they can figure out how to squeeze more vehicles out of the existing plants for the short term.

For the long term, he said he doesn’t like GM to have factories idled. The company has closed 14 factories in the past two years as it struggled through bankruptcy protection, and it has placed the idled Spring Hill and Janesville, Wis., plants on standby in case they are needed.

“We’ve got some plants that I’d like to allocate product to,” Reuss said, adding that Spring Hill was a very good factory that is versatile enough to build several models.

GM had only a 13-day supply of the Equinox and 18 days of the Terrain at the end of December. Both crossovers are equipped with four-cylinder engines that can get up to 32 mpg on the highway.

GM has a 25-day supply of the SRX, a new Cadillac crossover, and 54 days worth of the LaCrosse, a new Buick luxury sedan, according to Ward’s AutoInfoBank.

Also Monday, Chrysler CEO Sergio Marchionne says the automaker will start hiring production workers again if its sales begin to meet the company’s projections. He didn’t give a timeframe for hiring.

He also said Chrysler is revamping its models and will need more engineering and development workers, possibly starting with temporary workers.

“We just don’t have the manpower,” he said Monday.

Chrysler’s former owners, Cerberus Capital Management LP, cut white collar jobs with layoffs and through buyout and early retirement offers, thinning Chrysler’s engineering ranks.

Marchionne also said Chrysler has maintained the $5 billion in cash reserves that it had in November, despite a year that saw sales drop 36 percent. December sales fared better, down only 4 percent, although industry observers said 50 percent of those sales were to lower-profit fleet buyers rather than individuals.

He said Chrysler will not produce too many cars and discount them simply to boost sales numbers. The company, he said, wants to sell at a profitable level but still plans to double U.S. and global sales by 2015.

He said Fiat’s management has been running Chrysler only for seven months, and already the company is putting out higher-quality vehicles than it did when Fiat took over.

The best way to change the public’s perception of poor quality is to produce better vehicles, Marchionne said.

“The only thing you can do is shut up, work very hard to get the issues resolved,” he said.

At GM, Reuss said if he does his job correctly and restores faith in the GM brands, the company could hire workers again. In the short term, he said GM will try to raise output at existing plants.

The Terrain and Equinox are made at a factory in Ingersoll, Ontario, while the LaCrosse is built in Kansas City, Kan. The SRX is made in Ramos Arizpe, Mexico.

GM dealers have reported shortages of all four products, and Reuss said he has fielded e-mails from customers frustrated that that couldn’t get vehicles they ordered.

The Ontario factory is working around the clock, and GM has plans to add a third shift to the Kansas City operation. Details on the Mexican plant were not available Monday.

GM in November acquired complete ownership of the Terrain and Equinox factory, which now employs 2,500 workers. Previously it was a joint venture with Japanese automaker Suzuki Motor Corp.

The Kansas City plant, which employs 3,000 is preparing for a third shift early this year.