Automakers brace for new year
The auto industry won’t soon forget 2020, but it can’t embrace a 2021 recovery yet.
Last year’s turbulence casts a long shadow over this year, assuring us that it’ll be a while before we shake the horror – and the heroics – of last year and return to any sense of normal.
And “normal” will likely be redefined. Consider the unprecedented moves brought on last year by the global coronavirus pandemic: The proliferation of online retail car sales and home deliveries as dealerships went on lockdown; cancellations of nearly all auto shows; idling car factories across North America for two months; engineers to executives working remotely and General Motors and Ford Motor Co. learning overnight to make lifesaving ventilators, face masks and shields. COVID-19 even changed the way people used their cars, with many seeing it as a makeshift office or private place to escape.
Oh, and Ford got a new CEO, Jim Farley, and it saw management shake-ups in the process as the automaker works to boost its balance sheet.
Amid all that, the carmakers pushed forward plans to bring more electric cars to market and formed alliances to fund it. This year promises to be a turning point of sorts for EVs with several slated to launch.
Fortunately, auto sales rebounded in the second half, delivering profits in the third quarter and robust fourth-quarter sales for GM, though its crosstown rivals Ford and Fiat-Chrysler Automobiles did not do so well.
There is a vaccine ready for the masses, but there is also a new “super COVID” strain hitting us, unemployment remains almost 4% higher than it was this time a year ago and economic uncertainty looms.
This year largely depends on what
happens with the pandemic that caused last year’s upheaval.
“What we know of 2020, that was so unforgettable about it, started in midMarch – and the trauma that came out of COVID-19 is by no means over,” said Harley Shaiken, a business professor who specializes in labor at the University of California, Berkeley.
Production halt and heroics
Meanwhile, in mid-March last year, automakers closed their office buildings, telling employees to work remotely. Thanks to technology, the car companies were able to continue with business even when no one was coming into the office.
By month’s end, the car companies
agreed to shutter U.S. factories, too, after meeting with the UAW, which pressed for hourly worker safety. The plants would stay closed for eight weeks.
Here, the union played a vital role, Shaiken said, adding, UAW President “Rory Gamble put out the message, in the simplest of terms, that we have to act as if our sons and daughters were on the assembly line. It made a difference and likely saved lives.”
The shutdown was unprecedented, but when automakers did restart the plants in late May they were met with low demand for fleet vehicles. It was a blessing in disguise because the carmakers would have had a severe inventory shortage if both retail and fleet had recovered at the same time, said Edmund’s Caldwell. Demand by fleet companies, such as rental cars or construction companies, remains depressed, but is slowly recovering.
A few plants stayed open during that two-month period, allowing GM and Ford to convert them to make masks, ventilators and other medical supplies as the U.S. faced a shortage of such goods.
Then there are supplier parts problems. At the end of last year, a swell of COVID-19 cases in Mexico caused parts shortages at some U.S. assembly plants. GM, for example, had to run partial shifts at least once at its Arlington Assembly plant in Texas where it builds the hot-selling full-size SUVs. On Friday, Ford said it would temporarily shut down its Louisville Assembly Plant, which builds the Ford Escape and Lincoln Corsair, because of an inability to get parts.
The ‘haves’ and ‘have nots’
Many car dealers were ordered to close for a period, too, in many states last spring. But they showed their flexibility by adopting online sales and home deliveries, pulling the digital car buying experience ahead by years.
In some ways, 2020 brought the bifurcated consumer car market to the surface. Dealers saw very expensive SUVs and pickups selling like hot cakes while sales of lower-priced vehicles were stagnant.
“People with money continued to buy and those who lost their jobs or had trouble with credit can’t buy anything and that will likely continue,” said Michelle Krebs, executive analyst for Cox Automotive.
“The pandemic worsened the divide between the haves and have nots. That’s why sedan sales are down because they are bought more by people on budgets.
They were pushed out of the market or to the used market, which is booming.”
Still, the online sales likely helped salvage what could have been a more dismal sales year. Krebs said the industry sold about 14.5 million new vehicles in 2020, down from 17 million in 2019. Cox does not include heavy duty or medium duty trucks in its data.
Cox has increased its 2021 forecast to 15.7 million vehicles expected to be sold, based on the strength of year-end sales and other good news such as a second stimulus package has passed, elections are over, there is a strong stock market, and a the rollout of vaccines, Krebs said.
Resurrect the dead
The in-demand vehicles in 2020 year were was pickups and SUVs, which Jensen and other dealers complained they could not get enough of even when the industry was back at full production with worker safety protocols in place across factories. That much hasn’t changed. Automakers struggle to catch up to demand, a feat that will likely take until the second half of this year.
“We expect there will still be some inventory shortage this year due to catching up and filling the pipeline,” Krebs said.
But the pandemic did resurrect the dead in Canada last year. GM needed to build more full-size pickups pronto. Enter the defunct Oshawa Assembly in
Ontario and Unifor, the union for Canada’s autoworkers. During its contract talks, Unifor President Jerry Dias got GM to agree to reallocate product to the plant. GM starts building pickups at Oshawa next year.
“That plant was dead and gone and now it’s back. That’s a major achievement for Unifor, General Motors and Canada,” Shaiken said. “We saw some of that with the UAW in late 2019, the fact that real money is going into Detroit Hamtramck – that’s a real boon for the industry too.”