When news leaked out Tuesday that Ford Motor would cut 10 percent of its salaried workers, it underscored how the auto industry's strong sales are slipping after years of consecutive growth since the Great Recession. In April, the industry reported a 4.7 percent sales drop. General Motors, Fiat Chrysler and Ford showed declines of 7 percent or more in sales. Japanese car companies also were off in the North American market, although not as much.
As vehicle demand has ebbed, automakers find themselves dealing with bloated inventories. At the end of April, GM had enough vehicles to last 100 days, with 60 days the ideal level. The lower sales affect both sedans and high-margin SUVs and trucks, which have been benefiting from lower gasoline costs. The most sluggish lines are small and midsize cars, which larger vehicles overshadow. And due to government regulations, it's not as simple as simply shutting down most small car production capacity. Automakers have to sell small cars to meet industrywide auto emission standards.
Declining sales have led to factory layoffs. GM will furlough 1,100 workers at its Lansing, Michigan, plant for at least five months. Fiat Chrysler has laid off 3,200 workers at its facilities in Toledo, Ohio, as it retools its operations. This development, if it continues, could put the industry at odds with President Donald Trump, who is pushing to bring industrial jobs back to the U.S. The auto sector's ebbing fortunes contrast with the rises in consumer optimism, boosted by steady job growth and low unemployment. During the first quarter, however, gross domestic product turned in its weakest growth in three years at a 0.7 percent annual pace, as consumer spending barely rose and companies spent less on inventories.