Shifting demand from cars to trucks and SUVS is forcing General Motors to lay off more than 2000 workers indefinitely at two assembly plants in Ohio and Michigan, starting in January.
The company said this week it would suspend the third shifts at factories in Lordstown, Ohio, and Lansing, Michigan, because of the market change, which is growing and shows no sign of abating.
From January, about 1250 workers will be furloughed at the Lordstown plant, which makes the Chevrolet Cruze compact car. A further 840 will be idled at the Lansing Grand River factory, which makes the Chevrolet Camaro muscle car and Cadillac ATS and CTS luxury cars.
"It's supply and demand, and right now the demand is not there for what we have," said Glenn Johnson, president of a United Auto Workers union local at the Lordstown plant, east of Cleveland.
Last month, 61.6 per cent of US new vehicle sales were trucks and SUVs, according to Autodata Corp. That's a record likely to be broken said Jeff Schuster, senior vice-president for forecasting at consulting firm LMC Automotive.
Because of the shift, it's likely the GM layoffs won't be the last at auto factories that build only cars in the slowing compact, subcompact and midsize segments, Schuster said. "It's not inevitable but the likelihood is certainly higher," he said.
Americans have been moving away from cars toward trucks and SUVs for several years now as gas prices have dropped to near US$2 a gallon and the larger vehicles have become more efficient. Baby boomers and young people are attracted to smaller SUVs because of their cargo-carrying ability, high seating position and visibility.
Sales of the Ohio-manufactured Cruze are down nearly 20 per cent this year even though a new version is only in its second production year. Of the vehicles made in Lansing, ATS and CTS sales each are down about 17 per cent this year, while Camaro sales are off 9 per cent.
GM doesn't know when the workers will be called back, said spokesman Tom Wickham. "Looking ahead at 2017 we know that the car market continues to soften and the crossover (SUV) and full-size truck market continues to grow," he said. Laid-off workers will get supplemental pay and state unemployment benefits that will amount to most of their wages for a year.
GM also announced this week it would invest more than US$900 million at a Toledo, Ohio, transmission plant, the Lansing Grand River factory and a casting plant in Bedford, Indiana, to prepare for undisclosed new vehicles. This will preserve jobs but not create new ones.
The GM layoffs are not the first this year for the US auto industry, which has experienced healthy year-over-year growth since 2009. But sales are starting to slow from the record of 17.5 million set last year.
Last month, GM's crosstown rival Ford said it would temporarily idle four North American assembly plants to better align production with demand. Ford has scheduled one-week closures for plants in Kansas City, Missouri, and Hermosillo and Cuatitlan, Mexico. Those plants make the F-150 pickup truck, the Fusion sedan and the Fiesta subcompact. It also scheduled two weeks of down time for its Louisville, Kentucky, plant, which makes small SUVs.