Auto execs: Still too many plants

By Chris Isidore, senior writer

NEW YORK ( -- The U.S. auto industry has been decimated in recent years by a rash of plant closings. But according to a survey of top industry executives, more shutdowns could be on the way.

The survey, conducted annually by accounting firm KPMG, found that 88% of top industry executives thought there is still too much capacity at North American auto plants.

Even with recent closings, the 200 executives at automakers and suppliers around the world surveyed in the fall of 2009 indicated overcapacity is a bigger problem today than a year ago.

General Motors announced last year it would shed 12 plants as part of its bankruptcy, while Chrysler Group said it would close another four during its reorganization.

Ford Motor (F, Fortune 500) also announced closings of parts plants that had been run by Visteon, its former parts unit. Even Toyota Motor (TM) closed a North American plant for the first time and it delayed construction of another plant.

Wards Automotive, a research firm, estimates that plant closings cut North American capacity by about 1.5 million vehicles in 2009, down to 18 million vehicles.

But U.S. auto sales plunged 21% last year to 10.4 million vehicles, and forecasts are for sales to rebound to only about 11.5 million this year. Most analysts and company forecasts acknowledge it will be many years before U.S. sales return to the average annual sales level of 16.7 million the industry achieved in the decade before the recession.

"Despite the fact we've taken out capacity, if volumes remain low we will continue to be in an overcapacity situation," said Betsy Meter, the auto industry audit leader at KPMG. She said executives believe it's likely there will be additional mergers and consolidation in the sector that could lead to plant closings.

The closings in 2009 were only the latest of dozens of plants shut in the previous five years by the three U.S. automakers as their market share continued to slide.

Employment at U.S. auto plants has fallen by more than half since the start of the decade, even as overseas manufacturers have opened new plants here. Last year alone, employment at U.S. auto and parts factories fell by 123,000 workers, or 16%, according to the Labor Department. To top of page

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