A decade after the Great Recession threw the “Detroit 3” into a tailspin, along with so many Americans who lost their homes and life savings,…
A decade after the Great Recession threw the “Detroit 3” into a tailspin, along with so many Americans who lost their homes and life savings, General Motors CEO Mary Barra announced this week that her company will shutter factories and eliminate an estimated 14,000 white collar and blue-collar jobs.
Critics decried her as ruthless. And the value of GM stock grew.
Soon Ford Motor Co. will announce its early retirement buyouts amid reorganization, a signal that the economic landscape goes beyond GM. No question, things were bound to deteriorate. The whole business is cyclical, after all.
And the largest car market in the world, China, is seeing a slowdown, too.
So cutting passenger cars once seen as key to U. S. carmakers’ recovery appears to make sense.
Yet no one needs to be frightened, economists say. America is at full employment and that’s good for the economy.
But when GM sheds about 7,000 workers in the metro Detroit area, for a total of 14,000 or so in North America, that’s significant.
When Ford is forecast to trim 10,000 workers from its rolls in metro Detroit for a total of 20,000 or so in North America, well, those numbers start to add up.
“Car sales hit a record in 2016 and have been edging downward since,” said Michelle Krebs, senior analyst for Autotrader. “At the same time, the auto industry is on the verge of potentially massive change,” she added. “Auto companies are investing in future things, like autonomous vehicles, electric vehicles, mobility services like ride sharing. No one is clear on when those will turn a profit.”
She continued, “The major takeaway of the Great Recession was that automakers must keep their cost in line so that even if sales plummeted they could still break even or eke out a profit.
Krebs said that coming out of the recession, automakers laid off workers and cut plant capacity. But as the good times came, the companies added people. Companies like Ford have said maybe they added too many. So now they’re preparing for the next dip, she said.
Focusing exclusively on the strength of America and the U.
