Automakers are starting to cut U.S. jobs
As demand falls, there is less work in the nation’s assembly plants
DETROIT — 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 consulting firm Oliver Wyman.
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 Donald Trump’s promises to pressure automakers to save and create good-paying U.S. factory jobs.
Industry analysts said consumers might be pulling back on spending because of tighter credit conditions and more expensive vehicle loans.
The impact on employment is uneven, however, reflecting the evolving tastes of U.S. car buyers.
With low gasoline 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 SUVs 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 SUVs.
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, 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 it canceled the project after meeting stiff opposition from Trump.
Ford’s China move will not cost any U.S. jobs, because Focus production in Michigan will be replaced by trucks and SUVs.
But the decision could inflame trade tensions. And if falling sales overall in the United States continue to cut employment in U.S. 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.