Skip to content

For Autos, the Party May Not Be Over, But It’s Slowing Down

Bill Koenig
By Bill Koenig Senior Editor, SME Media

COMMENTARY

For the U.S. auto industry, the party may not yet be over but it’s slowing way down.

The industry hit rock bottom a decade ago when General Motors Co. and Chrysler went through U.S. government-back bankruptcies. That was part of a huge industry slowdown.

For much of this decade, sales recovered. It got to the point where there were four consecutive years with deliveries of 17 million or more.

In fact, it analysts had expected sales to dip below 17 million in 2018. That didn’t happen. But things definitely are cooling off now.

In the first quarter of 2019, industrywide deliveries fell 3.2 percent to 4.12 million, according to Automotive News, which compiles sales data. That job is harder than it used to be. Two heavyweights, GM and Ford Motor Co., have opted to only announce U.S. deliveries on a quarterly basis.

Sales declines are fairly widespread. GM’s deliveries slid 7 percent in the first quarter. Toyota Motor Corp.’s fell 5 percent. Fiat Chrysler fell 3.2 percent while Ford’s declined 1.6 percent, as increased sales of trucks and SUVs almost made up for a 24 percent falloff in car sales.

Automakers face headwinds that mean sales won’t rebound soon.

“The pool of people who can afford to buy a new vehicle is being reduced by higher prices and affordability concerns, and we’re likely seeing signs of that in the sales numbers,” Jonathan Smoke, chief economist of Cox Automotive, said in a written statement. “As a result of multiple years of rate and price inflation, new vehicles payments have become a big hurdle, driving people into used cars.”

What’s more, the industry is showing other signs that the good times may not be rolling that much longer.

March Jobs Report

In March, the motorized vehicle and parts sector cut 6,300 jobs, according to the monthly jobs report from the U.S. Bureau of Labor Statistics. That was led to an overall loss of 6,000 manufacturing jobs for the month.

During that month, GM shut down its Lordstown, Ohio, assembly plant. It’s one of five factories in the U.S. and Canada that GM said had no new products lined up. The automaker was attacked by President Donald Trump, who is demanding GM remedy the situation.

The problem is the factory makes – check, used to make – the Chevrolet Cruze small car. Trying to switch the factory to larger trucks and SUVs would require a huge investment in new tooling. Officially, Lordstown isn’t closed; that determination will be made during negotiations with the United Auto Workers union later this year. But the odds don’t look great for the Ohio operation at this point.

To be sure, the news isn’t all bad. Fiat Chrysler said in February it plans to invest $4.5 billion at existing plants in Michigan and to build a new factory inside Detroit city limits. All of that is part of an overall plan to boost output of Jeep and Ram brand vehicles.

Still, the industry faces plenty of challenges. Automakers are coping with the plunging popularity of cars and adjusting their lineups accordingly. Ford is in the midst of salaried job cutbacks, and the full extent of those aren’t yet clear. The UAW negotiations with GM, Ford and Fiat Chrysler always have some degree of drama. Finally, the industry still is figuring out its strategy for self-driving and electric vehicles.

In other words, 2019 isn’t shaping up as a big automotive party.

Related Articles

  • Latest Videos

  • Connect With SME Media

Webinars, White Papers and More!

SME's Manufacturing Resource Center keeps you updated on all of the latest industry trends and information. Access unlimited FREE webinars, white papers, eBooks, case studies and reports now!