Expert: Auto industry’s rebound faces long road
It’s going to take at least two years for auto manufacturers to restore the sales and production numbers seen before the start of the coronavirus pandemic, an industry expert has told Michigan legislators.
Despite successful efforts from suppliers and manufacturers to keep their doors open and employees safe, staffing shortages and some overall drop in demand means the industry needs to continue to adapt and work collaboratively, said Carla Bailo, president and CEO of the Ann Arbor-based Center for Automotive Research.
“Everyone is predicting this year about 13 million (vehicles sold); pre-COVID, we were about 17 million. We expect it’s going to take another two years, but that’s predicated on a good recovery and continued recovery throughout this year,” Bailo said during a legislative hearing Wednesday in Lansing.
“Should we have another hit in the fall, we’ll have to adjust those figures. So about two years to come back to where we were.”
Bailo joined Michigan manufacturers and industry authorities in briefing legislators on the pandemic’s impact on the automotive world. Every speaker agreed the auto industry’s ability to produce personal protective equipment helped save lives and jobs, but there are real and practical problems that operating during a pandemic will present for the foreseeable future.
The discussion comes as every industry tries to maintain a tenuous grasp on operating during a pandemic.
Automotive manufacturing shut down like every other industry in March, even as suppliers and large manufacturers looked for ways to produce vital health and safety equipment to fight COVID-19, the disease caused by the coronavirus.
Any new halt in production, even a short one, would be crippling, said Brian O’Connell, General Motors regional director of state government relations.
“The shutdown had a huge impact on our industry and our company. And we cannot afford a shutdown. We cannot afford a week shutdown,” O’Connell said.
Demand for new and used vehicles is down, but Bailo said not as much as some expected. Although overall vehicle sales were down 25 percent, sales of the Michigan mainstay, pickups, are down only 10 percent. At the same time, there are 20,000 fewer jobs in the automotive industry compared to the second quarter of last year. Michigan’s jobs in the industry are down 18 percent — Bailo said that’s the lowest level since 2009.
“There was a lot of doomsday forecasts early on, but the automotive industry has stayed resilient and most of the plants have been able to stay open,” Bailo said.
Now, GM, Ford Motor Co. and Fiat Chrysler Automobiles say they continue to follow strict testing and quarantining protocols for employees who may be sick or who came in contact with someone who has COVID-19.
The UAW, which represents about 150,000 workers from the Detroit Three, repeatedly advocated for strict safety practices and heralded the manufacturers’ recent decision to continue testing employees even if they showed no symptoms of the virus.
Workers must be healthy and feel safe to keep production moving, noted John Walsh, president and CEO of the Michigan Manufacturers Association.
Manufacturing in the state has rebounded some since the start of the pandemic, but as of July, there were about 69,000 fewer Michiganders employed in manufacturing than the 628,000 who had jobs in the industry last year.
While working from home or virtually may not substantially disrupt other industries, it’s essentially not an option for most manufacturers, Walsh said.
“This is going to continue to be an issue. It’s a strain on the manufacturing sustainability and keeping the production line running,” Bailo said. “You don’t have the option to work remotely when you’re on the line. And if you’re a single parent trying to educate children, that’s a significant problem.”
GM relies on the safety practices every day, requiring masks at all times while on site, O’Connell said.
“We cannot have an outbreak at our plants. It shuts us down. It shuts our suppliers down. The impact is tremendous on us,” O’Connell said.
Legislators and industry leaders highlighted efforts by many companies to produce personal protective equipment. GM and Ford recently announced they provided the federal government with tens of thousands of ventilators, fulfilling the terms of their contracts to built the live-saving machines that were in short supply.
Ford delivered 50,000 ventilators in conjunction with a $336 million contract. The company also donated 1.5 million masks as part of a free mask initiative led by the governor.
GM plans to donate 2 million masks to Michigan public schools. That’s in addition to the 30,000 ventilators it built as part of a $489 million federal contract.