Imbalance Between Demand For Trucks, SUVs, and Sedans Leads To Layoffs In Auto Industry

Sales of sedans continue to plummet in the US as customers opt for more and more light trucks and SUVs. Through the first five months of this year, sales of sedans fell 11 percent and truck sales rose 4.7 percent. That means manufacturers in the auto industry are slashing the number of sedans produced and increasing truck and SUV production, leading to layoffs at the factories where those sedans are made.

Ford just made a corporate decision to stop building its Focus small sedan in America and shift production to China by 2019. The workers who built the Focus will transition to building SUVs instead.

Workers at GM’s Lordstown factory are feeling the pain. Lordstown is where the slow selling Chevy Cruze. Those falling sales caused the company to cancel the third shift on January 20 — the day Donald Trump was inaugurated. “This is about economics, not what Trump says,” said Robert Morales, president of United Auto Workers Local 1714 which represents workers at GM’s Lordstown stamping plant. “Even if Trump went out and bought 10,000 Cruzes a month, he wouldn’t get the third shift back here.”

The auto industry has been responsible for much of America’s productivity gains for the past several years. Mark Muro, of the Brookings Institution, has pulled together information that shows the industry was responsible for most of new US manufacturing jobs in 2015 and 2016.

In the first quarter of 2017, the auto industry accounted for only 2 percent of the 45,000 manufacturing jobs created. “There’s no argument with the idea that auto has been pulling the manufacturing sled up the mountain for the last three or four years,” Muro said. “If you take auto out, you’re left with a very tepid outlook indeed.” The Federal Reserve last week said factory output fell 0.4 percent in May, caused in part by a 2 percent drop in motor vehicles and parts production.

GM will close the Lordstown factory for 5 weeks this summer — three more than usual — in order to reduce dealer inventories of the Chevy Cruze. Some workers may transition to GM’s SUV assembly plant in Arlington, Texas but that means uprooting families, pulling kids out of school, and selling homes — decisions not taken lightly.

At Lordstown, the union and workers are trying to raise their game. The factory recently won an award for local innovation for developing a new part that helps the Chevy Cruze run better. When GM goes looking for factories to build new products, they hope their initiative will help swing new work their way. “We’re working hard to make the best product we can,” said Glenn Johnson, president of UAW Local 1112 at Lordstown, “so we can raise our hands and say to GM ‘look at what we can do.”

The solution is higher gas prices, but with the price of crude oil down and looking to go lower, that’s not likely to happen any time soon. If Congress had any leadership capability at all, it would simply raise the federal gasoline tax to $1.00 a gallon, let the chips fall where they may. $2 dollar a gallon gasoline is just ludicrous if the US has any realistic intention of addressing carbon emissions from the transportation sector. Little chance of that actually happening, though.

Source: Reuters via Autoblog