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After years of growth, automakers are cutting US jobs

After a prolonged recovery that culminated in two years of record sales, the American auto industry is slowing down, with fewer buyers in dealer showrooms and fewer workers on the factory floor.

Automakers said this week that sales dropped in June for a sixth consecutive month, falling by 3 percent from a year ago, a trend that analysts do not see letting up anytime soon. And as demand falls, there is less work in the nation’s auto-assembly plants — primarily those that build traditional passenger cars.

Last year, those plants hit a peak of 211,000 workers, a 55 percent increase since the depths of the recession in 2009. That figure has dropped by more than 2 percent so far this year, to 206,000 workers in April, according to the Bureau of Labor Statistics, and could shrink further as sales continue to fall.

“There’s been a consistent reduction in plant output in the last six months, and what is ahead in the next six months could be pretty startling,” said Ron Harbour, an auto manufacturing expert at the consulting firm Oliver Wyman.

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The decline signals at least a pause in Detroit’s resurgence from the dark days of the financial crisis, which General Motors and Chrysler survived only through bankruptcy and bailouts. It’s happening despite President Trump‘s promises to pressure automakers to save and create good-paying American factory jobs.

Industry analysts said consumers might be pulling back on spending because of tighter credit conditions and more expensive vehicle loans. “Higher interest rates and uncertainty around fiscal policies will slow economic growth, and may become headwinds for auto sales,” said Charlie Chesbrough, an economist for the research firm Cox Automotive.

The impact on employment is uneven, however, reflecting the evolving tastes of American car buyers.

With low gas prices motivating buyers to trade in traditional cars for larger models, factories making trucks and sport utility vehicles are humming, with some producing around the clock on three shifts. Even as overall vehicle sales declined in June, sales of trucks and S.U.V.s rose about 4 percent from a year earlier.

That consumer trend is playing out in the opposite direction at plants building small and midsize cars, which are scaling back or shutting down entirely while they are converted to produce trucks and S.U.V.s.

What none of the automakers are doing is building new plants or adding a significant number of new jobs anytime soon.

“The industry has dramatically expanded employment in the United States in the last several years, but the growth is just not there anymore,” said Harley Shaiken, a labor professor at the University of California, Berkeley.

And companies are increasingly looking to build their less profitable car models outside the United States. Ford Motor, for example, said in June that it would move production of its Focus sedan to China from Michigan.

The company had previously planned to move the car to a new plant in Mexico, but canceled the project after meeting stiff opposition from Mr. Trump.

Ford’s China move will not cost any American jobs, because Focus production in Michigan will be replaced by trucks and S.U.V.s.

But the decision could inflame trade tensions. And if falling sales over all in the United States continue to cut employment in American plants, it could spur protectionist measures by the Trump administration, like imposing border taxes on imported vehicles.

Scaling back jobs in car plants is part of a newfound discipline among automakers to avoid bloated payrolls and inventories when sales start slipping.

That is a big change from pre-recession times, when the domestic automakers were too often awash in overproduction, or saddled with union contracts that funneled idled workers into so-called job banks with nearly full pay and benefits.

That program was eliminated in subsequent labor pacts with the United Automobile Workers. Moreover, the Detroit companies have also hired large numbers of lower-wage, entry-level employees with less costly unemployment benefits.

Those moves have made it easier for the companies to scale back production based on changes in the market.

G.M., for example, has reduced the number of shifts at several of its domestic plants, the most recent reduction being its announcement of cutbacks at a factory in Kansas that makes the Chevrolet Malibu midsize sedan — a segment that is rapidly declining as more buyers gravitate to S.U.V.s.

“These decisions are always tough,” said Alan Batey, the president of G.M.’s North American operations. “But at the end of the day we have to be disciplined about our production plans.”

Fiat Chrysler, for its part, has eliminated production of compact and midsize cars altogether at factories in Michigan and Illinois, temporarily laying off workers as it retools the plants to produce S.U.V.s and trucks.

About 4,200 employees at the company’s factory in Belvidere, Ill., recently returned to work after being temporarily laid off several months ago, and will begin producing a new S.U.V. model at the plant later this month.

The bright spots in the overall employment picture are the expansion of production at niche automakers like the electric-car company Tesla, and by foreign car companies including BMW, which is adding jobs at its sole United States plant, in South Carolina.

And automakers are hopeful that sales of larger vehicles will get even stronger in the remaining six months of this year, as has been the case in previous years. “Seasonal factors drive a much higher retail mix of trucks and utilities in the second half of the year, so it makes sense to make production adjustments on the car side,” said James Cain, a spokesman for General Motors.

But few in the industry expect any major job growth anytime soon. G.M., for example, recently scaled back its projections for industry sales in the second half of this year, and analysts are predicting that annual sales will fall below 17 million vehicles next year for the first time since 2014.

“We are beginning to enter a period we call the post-peak,” said Jonathan Smoke, chief economist for Cox Automotive, which operates the auto-research sites Kelley Blue Book and Autotrader.

One factory that thrived after G.M.’s bankruptcy in 2009 was its small-car plant in Orion Township, Mich., north of Detroit.

The company invested more than $500 million to refurbish the factory and begin producing subcompact cars. Last year it added production of its new battery-powered Chevrolet Bolt.

But demand for small, ultra-fuel-efficient cars has waned drastically with lower fuel prices. Despite its modern production technology, the Orion plant is down to one shift of workers, with little hope of expanding production soon.

Workers at the plant were heartened this year when G.M. added a small operation to convert Bolts into autonomous vehicles for testing purposes.

While it hardly added any new jobs, the autonomous-vehicle project was a welcome addition to a plant operating at well below capacity. “It’s great to be a part of a product launch — even if it is a small one,” said Lindsi Green, one of a handful of employees working on the self-driving prototypes.

Source: cnbc economy
After years of growth, automakers are cutting US jobs

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