Fire at parts factory forces auto production cuts

AP News
Posted: Mar 04, 2011 5:31 PM
Fire at parts factory forces auto production cuts

A fire that closed an auto parts plant near Detroit earlier this week is now having ripple effects on five automakers, forcing two of them to close plants or cut production because they've run short of parts.

The impact of the blaze, at a Magna International Inc. interior parts plant near Howell, Mich., shows how years of work to make auto plants more efficient can fall apart when something interrupts the flow of parts in an intricate supply chain.

So far, the fire has forced General Motors Co. and Mazda Motor Corp. to stop making cars at some factories. The damaged Magna plant also makes parts for several Ford Motor Co., Nissan Motor Co., and Chrysler Group LLC vehicles. Ford, Nissan and Chrysler factories have stayed open, but it's uncertain for how long as Magna studies options to reopen the plant or make parts elsewhere.

If the Magna plant, which makes ceilings, consoles and other interior parts, is closed for a long time, it could hurt the automakers' sales if inventories become depleted on dealer lots just as the big spring and summer auto sales months approach.

For the past three decades, auto companies have cut costs and become more efficient by going to a just-in-time parts delivery system so they can avoid paying for huge stockpiles of parts.

To avoid buying costly machinery, many parts companies make a particular part at only one site, said Jim Gillette, an analyst with the firm IHS Automotive who advises parts suppliers. As a result, plants have few parts in storage, and they are so dependent on every link in the chain that the system fails if production is interrupted at a single factory, Gillette said.

""You can't do without the parts, even if it's a small part," he said. "Everything is pretty much single-sourced these days. It could be tough for them to get this thing going again."

Magna officials were working Friday to see if the plastic injection molding equipment at the plant, about 45 miles northwest of Detroit, had been damaged in Wednesday's blaze, said Tracy Fuerst, a company spokeswoman. Only about 25 percent of the factory space was damaged in the fire, but it burned two large holes in the roof of the building.

Fuerst said the company is looking at several options, including trying to get machinery running in the same location, moving it to a nearby factory or figuring out whether other Magna plants could make the same parts. Magna, based near Toronto, is a major parts manufacturer supplying customers around the world.

Firefighters poured 1.2 million gallons of water onto the factory to put out the blaze, and were able to save most of the machinery from damage, said Andy Pless, chief of the Howell Area Fire Department. He said it would be difficult to reopen the building quickly because it has electrical problems and the sprinkler system was wiped out by the fire.

The fast-moving fire started in a booth where foam is sprayed into a mold to make parts, but firefighters don't know what caused it. Pless said it was accidental.

Gillette estimated that it would be a week before Magna could be making parts again. If the stoppage is that short, automakers can make up production with overtime or added shifts. But if molds to make parts were damaged in the blaze, it could be far longer before production resumes, Gillette said.

GM canceled production shifts Thursday at assembly plants in Flint, Mich., and Lordstown, Ohio, and made changes at several others due to the blaze. The Lordstown factory, which makes the hot-selling Chevrolet Cruze small car, will be shut down through at least Monday, while two shifts have been canceled Monday at a crossover vehicle factory near Lansing, Mich., GM spokesman Chris Lee said. It's wait-and-see for a lot of other factories including transmission and parts plants, he said.

Mazda spokesman Jeremy Barnes said the company shut down production of the Mazda 6 midsize sedan at a plant it shares with Ford in Flat Rock, Mich., south of Detroit. "Our intention is to make up lost production through extended shifts, overtime and/or added shifts," Barnes said in an e-mail.

The fire comes just as the recovery in U.S. auto sales was starting to accelerate. February sales were up 27 percent compared with the same month last year, leading industry analysts to raise their forecasts for the year to above 13 million in sales. Last year automakers sold 11.6 million cars and trucks in the U.S.