Correction: This story has been updated to reflect that Fiat Chrysler Automobiles is in the first of a two-phase restructuring of U.S. operations. An earlier version of the story mischaracterized its progress. Also, the accompanying fact box has been updated. It should have said that a $700 million investment at the Toledo North facility is only for Jeep Wrangler retooling and the Warren Truck and Toledo South plants will share in the $1 billion investment that is expected to add 2,000 jobs. Aspects of those commitments were incorrect.
Workers and suppliers are bracing for further signs of an auto manufacturing slowdown this week when Detroit automakers report their second-quarter earnings, and forecasts for the second half of the year this week.
After seven straight years of employment growth, the number of workers in the auto industry declined over the past year. Despite record profits powered mostly by the sale of pickups and SUVs of all sizes, flattening sales and cratering interest in sedans are taking their toll at U.S. auto plants operated by the Detroit Three. Carmakers are making strategic decisions to bolster profitability, strengthen balance sheets and adjust vehicle lineups — even if that means axing production shifts and killing models.
The moves amount to a stark rebuke of President Donald Trump’s push for automakers to create more U.S. jobs and expand manufacturing at home. Six months into his presidency, the opposite is happening, concentrated in the industrial Midwest that helped deliver the New York mogul to the White House.
Recent shift reductions and temporary plant closures have already affected more than 7,500 workers at factories operated by General Motors Co., Fiat Chrysler Automobiles and Ford Motor Co. across the United States. Plants in Michigan and in Toledo have borne the brunt of reductions, with about 6,350 workers experiencing at least temporary layoffs.
In May, the auto industry employed about 204,000 in the United States, according to the U.S. Bureau of Labor Statistics. That’s down from 209,000 workers a year ago.
Layoffs have hit GM plants in Michigan particularly hard: GM has furloughed about 3,450 hourly and salaried workers at three car factories in Michigan and at a Michigan transmission plant since January, including the elimination of about 1,300 temporary workers.
GM is cutting shifts at two Lansing plants and at Detroit-Hamtramck Assembly. At Detroit-Hamtramck, 638 temporary workers were let go. The other GM workers at those plants have been placed in other GM positions or remain on layoff. Across the U.S., GM has laid off at least 4,500 U.S. workers since January and another 1,050 will be let go in September. And the automaker reportedly is considering eliminating at least six car models from its U.S. portfolio.
Fiat Chrysler is working to complete a massive restructuring of U.S. operations, which has put 2,900 workers on temporary leave, but will eventually lead to the carmaker adding 3,700 jobs. At Sterling Heights Assembly, about 1,400 workers were temporarily laid off for retooling to make the next-generation Ram 1500 pickup. About 1,500 were laid off at Toledo Assembly to gear up for the next-generation Jeep Wrangler.
Ford is offering buyouts to 1,400 white-collar employees and moving production of the next-generation Focus to China. Under CEO Jim Hackett, Ford is focusing on improving or potentially ditching underperforming products, including some sedans.
Industry slowing down
The trend is not lost on United Auto Workers President Dennis Williams. He’s been in touch with GM officials about layoffs at their Lordstown and Detroit-Hamtramck assembly plants.
“We are talking to the employer right now about not only the products they currently have there, but also what else we can do to boost additional products,” Williams said last week at a press event in Detroit. “But right now, there is slowness in the car industry and we’re watching it very carefully. We don’t know if it’s peaked yet and it’s going to go back up or what. But we’re tracking it and we’re talking to employers all the time about it.”
Mike Green spent 39 years working at GM’s Lansing Grand River Assembly Plant, retiring as head of UAW Local 652 less than a month ago. He sees a marked change in how automakers in the post-bailout era are responding to changes compared to reactions in decades past.
When automakers move quickly and act definitively on strategy changes and layoffs — a sharp departure from the pre-bailout days — workers have a better chance to plan and adapt to the changes.
“They are a lot more upfront this year with what’s going on,” Green said. “I think that dealing with things sooner, rather than later, is a much better approach for workers. At least you can deal with it sooner.”
Officials at Detroit automakers have been busy in the past year reacting to flattening overall sales — and to rapidly declining sales of sedans. In June, 36.7 percent of U.S. industry auto sales were passenger cars, down 13.2 percent from the same month a year ago. Analysts and automakers don’t see the trend changing any time soon amid low gasoline prices and consumer preferences for the more-commanding seating positions and increased cargo capacity of SUVs.
GM’s moves have, perhaps, been most painful with thousands of workers being laid off collectively from multiple plants, a sign that the automaker’s leadership is determined to avoid the complacency of the past.
Ford parted ways with CEO Mark Fields in May despite strong earnings. The company is offering buyouts to 1,400 administrative workers — a process expected to be completed by in August — and temporarily laid off 130 workers at its Ohio Assembly in Avon Lake.
“The industry is under stress now and is doing what it should have been doing during the prior two decades — thinking about problems before they turn into disasters,” said Patrick Anderson, principal and CEO of consultants Anderson Economic Group in Lansing. “There is no clearer example of that than the departure of Mark Fields at Ford after he had produced record profits … By the old rules, he would not only have stayed on, he would have been showered with praise.”
A ripple effect
Analysts say some carmakers have adapted more quickly than others.
“It’s definitely a much healthier environment, and these decisions are being made much quicker. Ford and FCA have been very responsive,” said Joe Langley, principal analyst for North America light-vehicle forecasting at research firm IHS Markit. “It’s GM that’s been the outlier in terms of adjusting downwards.”
GM’s situation is highlighted by the most recent data on inventories. At the end of June, GM’s inventory level neared 1 million vehicles and a 105-day supply. FCA’s supply was the most lean at 71 days, while Ford’s stood at 79.
“Fiat Chrysler looks like a genius at the moment,” said Michelle Krebs, executive analyst at Autotrader. “It raised eyebrows when it decided to abandon the car business. Indeed, it did not have a dominant position in the small and mid-size segments, which now have taken a nosedive. That means relying even more heavily on Ram and Jeep.”
The sales plateau seen in the last year has yet to trickle down to companies like seat manufacturer Lear Corp. CEO Matt Simoncini doesn’t read the signs as indicative of a multi-year downturn, but Lear is taking particular care in planning its production schedules.
“For us, it really depends on the product,” he said. “The short answer is, if we’re on a particular program that has production suspended, there would be a commensurate (impact on Lear’s operation) ... So far we’ve just seen a small impact on passenger cars.”
That doesn’t mean major players in the industry aren’t on the lookout for major problems. In his meeting with reporters, UAW’s Williams was asked if he anticipated major problems, such as plant closures, based on current sales trends. He immediately zeroed in on the Detroit Three’s expanding practice of building cars outside the U.S. and selling them here.
“When an employer like GM, Ford or any other employer produces so many vehicles in Mexico and around the world and brings them back to the U.S. for sale and comes to us with a plant closing, there is going to be a problem with us — without a doubt,” Williams said. “So a corporation that deals with us has that kind of philosophy is going to have an issue with the UAW.”
Detroit 3 scalebacks
These are some of the layoffs and shift reductions made by Detroit automakers:
■Ford cut a shift at its Michigan Assembly Plant in Wayne in June 2015. Last year, it made production cuts at multiple assembly plants to trim inventories on cars, trucks and SUVs.
■Ford temporarily laid off 130 workers at Ohio Assembly in Avon Lake earlier this year. They are expected to return in the fall.
■In June, Ford offered buyouts to 15,000 salaried employees in the U.S., Canada, Mexico and Asia/Pacific region as it tries to trim 1,400 white-collar positions by the end of September.
■Production of the Ford Focus sedan for the U.S. market will move to China in the second half of 2019, though no jobs will be lost here. Michigan Assembly, where the Focus is built, will be retooled to build the 2019 Ranger and 2020 Bronco.
■Fiat Chrysler has moved Jeep Cherokee production from Toledo to Belvidere, Ill. When a $700 million upgrade is complete, the Toledo North plant will make the Jeep Wrangler. About 1,500 workers were put on temporary leave.
■Sterling Heights Assembly is in the midst of a $1.48 billion retooling for the next-generation Ram 1500. About 1,400 workers were temporarily laid off.
■Warren Truck Assembly will get an upgrade to build the Jeep Wagoneer and Grand Wagoneer.
■GM since January has cut third shifts at car factories Lansing Grand River and Lordstown Assembly in Ohio; the second shift at the Detroit-Hamtramck; and the third shift at its Lansing Delta Township SUV plant. It cut a shift at Warren Transmission. GM plans to bring back about 500 jobs at Lansing Delta Township in first-quarter 2018.
■A third shift was added at Spring Hill Assembly in Tennessee, where it builds SUVs.
■GM has added weeks of production downtime at car factories, including idling its Orion Assembly Plant in Orion Township for a month this summer. The company is idling production this month at the car-producing Flex Line at its Oshawa Assembly Plant in Ontario, leaving two shifts of workers on temporary layoffs. Oshawa stopped production on its Consolidated Line in July.
■GM will cut the third shift in September at Fairfax Assembly in Kansas City, Kansas. About 1,050 will be laid off.