Auto Industry Decline Leads to Job Cuts
After stellar sales figures in 2016, demand for U.S. cars has cooled off this year. What has followed the slumping demand is a string of U.S. automotive industry layoffs, which has left thousands of factory workers out of work. With all major U.S. automotive companies turning to cost-cutting and restructuring measures in order to save their bottom lines, we are seeing signs of the much-dreaded U.S. auto industry decline.
The U.S. auto industry had a streak of record-high sales in the past couple of years as oil prices fell and the job market improved, giving average Americans more of an ability to purchase new cars. But, as it’s said, after the rise must come the fall. A correction in sales figures was due after the industry peaked in 2016.
Auto sales dropped by 2.1% in the first half of 2017, compared to the same period a year ago, putting an end to the auto industry’s most recent golden era. For employees of the U.S. auto industry, this marked the beginning of their job insecurity.
The harsh reality is that changing consumer tastes are playing a defining role in the softened demand for cars. Sales data from the major automakers shows that demand for passenger cars, including compact cars and mid-sized sedans, has tumbled this year. Americans are instead preferring to buy cars that offer more space, utility, and fuel efficiency. Consequently, sales of sports utility vehicles (SUVs), crossovers, and semi-trucks have picked up this year.
There is also anecdotal evidence that, unlike older Americans, millennials are holding off on big-ticket purchases as they divert their limited disposable income toward travel and food. Instead of buying their own cars, many of them are using ride-hailing services like Uber and Lyft.
General Motors Layoffs: Cuts to Workforce in Michigan
In the midst of plummeting demand and rising inventory, U.S. automotive companies had no choice but to turn to job cuts. Leading the way is America’s largest auto manufacturer, General Motors Company (NYSE:GM), which has permanently cut more than 3,000 jobs since the beginning of this year. In addition, hundreds more workers were sent on furloughs as the company temporarily idled many of its production plants.
Michigan lost the most GM jobs; about 1,100 layoffs were announced in March, and another 300 layoffs were announced in June as the company eliminated a shift at one of its assembly plants. Then, during the summer, the automaker extended shutdowns at two of its factories—in Lordstown, Ohio and in Kansas City.
The two factories produced GM’s “Chevrolet Malibu” and “Chevrolet Cruze” passenger cars, which have been experiencing declining demand. The Kansas City factory, which produced Chevrolet Malibus, later faced up to 1,000 job cuts as General Motors eliminated a shift from the factory amid slowing demand for the car.
Another 680 layoffs were announced earlier this month at GM’s plant in Spring Hill, Tennessee, where the company eliminated a third shift. The move had ripple effects across the industry and one of GM’s subcontractors—which provided services at the same factory—cut 361 jobs following the elimination of the shift.
The most recent General Motors layoffs took place just last week, when GM temporarily idled a factory in Detroit, affecting about 1,500 workers. The company also indicated that only part of the factory may be brought back into production once the shutdown is over, hinting that many of the layoffs may eventually become permanent.
The factory shutdowns and associated layoffs are part of the company’s plan to avoid cost pressures and an inventory glut.
Ford Motor Company Layoffs: Hundreds of Jobs Eliminated as Part of Cost-Cutting Strategy
Following in the footsteps of GM, the second-largest automaker, Ford Motor Company (NYSE:F), has been idling factories and laying off workers. Ford’s layoffs, however, have impacted more than just factory workers. Ford’s massive restructuring effort, which began earlier this year, has resulted in hundreds of non-factory workers losing their jobs.
The company shed 1,400 non-factory employees in May and indicated plans to increase the layoffs to 20,000, which is about 10% of its workforce. Ford CEO Jim Hackett confirmed earlier this month that the company is moving ahead with cost-cutting measures in order to reduce about $14.0 billion in expenses over the next five years. The company will also turn more toward making trucks, electric cars, and hybrids, which is where the company sees more growth in demand.
Tesla Layoffs: More Than 400 Jobs Cut in California
America’s most popular electric car manufacturer, Tesla Inc (NASDAQ:TSLA), laid off between 400 to 700 employees in the past week. The company cited performance reviews as the basis for the dismissal of workers in Palo Alto and Fremont, California. Insiders, however, are now saying that the layoffs may have actually been a part of the company’s cost-cutting efforts.
The unconventional carmaker is facing a severe cash crunch as it falls behind the production schedule of its latest mass-consumer car, the “Model 3.”
Cox Automotive Layoffs: 950 Jobs Lost as Part of Cost-Cutting Effort
Shifting trends are forcing all automotive companies to feel sales pressure, including those other than the major automakers. Take the example of Cox Automotive, Inc., which is one of the biggest owners of digital auto selling properties, including Autotrader.com, Inc. (an online marketplace) and DealerTrack Technologies Inc (an auto dealer software company).
The company cut 950 jobs earlier this year as part of its cost-saving efforts, as demand for its digital auto-selling tools cooled off. The Atlanta, Georgia-based company employed about 3,740 employees in the state, where most of the layoffs occurred.
Advance Auto Parts Layoffs: Over 475 Job Cuts as Part of Reorganization Plan
America’s largest retailer of auto parts and accessories, Advance Auto Parts, Inc., laid off 475 employees this summer. The company, which sells car and truck replacement parts like engines, brakes, and batteries, has been losing money in recent quarters.
Despite its acquisition of General Parts International, Inc., which made Advance Auto Parts the largest auto parts retailer in the United States, the company has been facing slumping sales tied to the auto industry’s overall decline. The company undertook a restructuring effort involving job cuts while it aimed to improve both its in-store and online shopping presence.
“U.S. auto sales receding: Cars ailing, crossovers booming,” USA Today, July 3, 2017.