Auto Industry Unexpectedly Announces Layoffs
American automakers General Motors Company and Ford Motor Company are cutting more factory jobs than the market had previously expected.
Despite having made repeated promises to President Donald Trump that they would keep adding more jobs, the two members of the “Detroit Three” vehicle manufacturers have gone back on their word. General Motors recently announced at least 4,000 planned job cuts. At the same time, Ford is cutting roughly 10% of its workforce.
The “Big Three” auto manufacturers had made a promise to the Donald Trump administration (after facing political pressure) that they would add factory jobs in 2017. However, executives at Ford and General Motors have continued to eliminate U.S. jobs to the extent that the cuts are outnumbering the job additions.
According to Jeff Schuster, Vice President of Forecasting at the auto industry research firm LMC Automotive, the companies are facing pressure from two sides. On one hand, the Trump administration is urging them to add jobs. On the other hand, the automakers are facing a decline in demand for their cars. He says that the pressure from both sides will ultimately lead to one side giving way. (Source: Ibid.)
It is apparent that the companies’ executives are responding to declining demand by decreasing factory output, which is ultimately leading to layoffs. Moreover, the American auto industry is generally seeing a shift in consumer tastes. There has been a decline in demand for passenger cars, as Americans switch to crossovers and semi-trucks.
At the same time, electric cars are seeing a significant rise in demand as companies like Tesla Inc are emerging as strong contenders in the race.
The auto industry saw its best year in 2016, when sales peaked and employment at assembly plants rose to its highest level in eight years since the Great Recession of 2009.
However, auto sales started losing their pace this year as growth began to slow down. To avoid a glut of unsold cars, the automakers are left with no choice but to cut production. Many factories are now seeing one or more working shifts being eliminated to match the lowered production.
U.S. automakers and their suppliers have been hoping for the Trump administration to make reforms in favor of their sector. Vehicle company executives have been seeking relief in the form of looser emissions standards and lower corporate taxes.
Those political measures could give the companies the incentive to move their offshore factory jobs, particularly those outsourced to Mexico, back to the United States (or at least slow down their offshoring).
“Despite Promises, Car Makers Are Set on Job Cuts — Update,” Fox Business, May 16, 2017.)