The Auto Industry May Be Headed Towards a Downturn—Or Already Be in One
The auto industry is the focus of much political posturing and attention. Cities like Detroit were once economic powerhouses and home to a thriving middle class, but have since been impacted hard by the decline in manufacturing jobs due to automation and outsourcing.
The auto manufacturing industry had been making a comeback, accounting for between 60% and 80% of all U.S. manufacturing jobs added in 2015 and 2016, according to Senior Fellow of the Brookings Institution Mark Muro, who compiled the data from government sources as reported by Reuters.
But thousands of layoffs have plagued the industry since the boom times. General Motors Company (NYSE:GM) alone has laid off more than 5,000 of its workers this year. And companies have looked to expand out from the U.S., with Ford Motor Company (NYSE:F) moving the construction of its “Ford Focus” model to China, where labor costs are far lower.
The Federal Reserve said that U.S. factory output fell 0.4% in May, the second decline in three months, which was partly due to a two-percent drop in motor vehicles and parts production.
One of the major issues harming auto manufacturing in the U.S. is competition from abroad in cheaper countries like China and Mexico. Another is that U.S. consumers are more likely to buy bigger cars, therefore incentivizing companies to move production of smaller vehicles abroad. Finally, consumption of vehicles overall has slowed in the U.S., again pushing companies towards focusing on international expansion.
Some of the thousands of layoffs that have affected workers across the country are only temporary, but even the temporary layoffs have been extended. A plant in Lordstown, Ohio, which already saw 1,200 layoffs earlier in January, is now expected to take a five-week hiatus, far longer than the usual two-week summer vacation closure.
Manufacturing jobs were one of the priorities of President Donald Trump when he ran his campaign. While generally making an appeal to bring back jobs of all sorts, manufacturing jobs were seen as a particular focus due to their often higher wages and benefits. Trump has claimed to have saved hundreds of manufacturing jobs at places like the Carrier Corporation plant in Indianapolis, though that claim has since been met with skepticism as layoffs have continued at the plant.
“For thousands of U.S. auto workers, downturn is already here,” Reuters, June 22, 2017.