U.S. Auto Boom Seems to Be History, Just as Trump Counted on Jobs

U.S. Auto Boom Seems to Be History, Just as Trump Counted on Jobs

- in Automotive
372
0

He added that the more optimistic consumer sentiment recorded since Mr. Trump’s election “hasn’t translated into what’s happening in dealerships where we’re trying to sell cars.”

Moreover, the top six automakers in the American market all reported declines from their April sales a year ago, and in every case the falloff exceeded analysts’ forecasts. Wall Street took notice: Shares of Ford Motor and Fiat Chrysler Automobiles were down more than 4 percent, and General Motors shares fell almost 3 percent.

In April, automakers sold 1.43 million cars and trucks, down from 1.5 million a year ago. But even before those totals were reported, automakers had started preparing to trim the number of vehicles they are making, which almost always means jobs are eliminated.

Graphic

Should Trump Get Credit for All Those Jobs?

A look at the companies that changed plans, announced new ones or stood their ground after catching the president’s attention.



OPEN Graphic


Some 1,100 workers at a General Motors plant in Lansing, Mich., are being laid off this month and will be out of work for at least the next five months, although about 700 of them are expected to be rehired by the end of the year. Three other G.M. plants are eliminating shifts, moves that will idle more than 3,000 other workers.

“We are very cognizant that we operate in a cyclical industry, and we are in the eighth year of expansion,” the company’s chief financial officer, Chuck Stevens, said in a conference call last week after the company reported first-quarter earnings. “We are very focused on acting like we are in a downturn.”

The automakers’ comeback since the 2009 crisis had been driven in large part by low gasoline prices that have fed Americans’ tastes for sport utility vehicles and trucks — particularly profitable categories, and the models more likely to be assembled in the United States rather than Mexico. Sales also benefited from pent-up demand as recession turned to recovery.

Now consumers seem to be holding off on spending more broadly — not just on cars, but on other big-ticket items, a primary factor in the economy’s tepid first-quarter performance.

Ford Motor and Fiat Chrysler both saw their sales fall 7 percent or more in April, while Honda’s fell 6.3 percent and General Motors’ 5.8 percent. Toyota declined 3.5 percent, and Nissan dipped 2 percent. (Those figures exclude the Japanese makers’ luxury brands.)

For General Motors, the domestic downturn compounds difficulties it is dealing with abroad. It has announced plans to sell off its Opel and Vauxhall operations in Europe, and on Tuesday it said it would take a $100 million charge to write off the value of its factory in Venezuela, which was seized by authorities in the volatile country two weeks ago.

Like G.M., Fiat Chrysler has idled several thousand workers this year while it retools factories in Toledo, Ohio, and Belvidere, Ill.

Further production cuts may be coming. Many analysts have forecast that auto sales will suffer a small decline this year — to about 17.2 million vehicles from the record of 17.5 million sold in 2016. But some expect the industry to see larger declines after that. AlixPartners, a consulting firm with a large automotive practice, is predicting that auto sales will decline to 16.6 million vehicles in 2018, and 15.2 million in 2019.

Photo

Henry Gonzalez, a salesman at the Doral, Fla., CarMax lot, showing a car to Wendy Morales. Late-model used cars are in increasing supply, crimping new-car sales.

Credit
Scott McIntyre for The New York Times

Mark Wakefield, a managing partner at Alix, said such declines would force manufacturers to lower production further. “They’re doing it already,” he said. “When the manufacturers take capacity out, that means less overtime, or actual layoffs.”

The trend toward lower production runs counter to the wishes of Mr. Trump, who has been pushing carmakers to make more cars in the United States and import fewer from other countries, including Mexico and Canada.

Slowing sales is not the only trouble the industry is facing. Inventories on dealer lots are rising. As of the end of April, G.M. had enough cars to last 100 days at the current rate of sales. The industry considers 60 days ideal.

Interest rates, if they rise later this year as the Federal Reserve intends, could crimp sales further.

Automakers are also resorting to ever sweeter incentives to sell models like small and midsize cars, which have been eclipsed by larger vehicles. In April, Hyundai Motor, the South Korean automaker, offered discounts of $5,000 or more on its Sonata sedan. “Midsized cars are really struggling,” said Andrew DiFeo, owner of a Hyundai franchise in St. Augustine, Fla.

Another challenge comes from the increasing supply and falling prices of late-model used cars. Some 3.6 million leased vehicles are due to be turned in this year, according to Manheim, an auto auction company. Another 4.1 million are due back in the market next year. Most of those will end up on dealer lots, where they make enticing and less expensive alternative to new cars.

Mr. Silverleib, the Honda dealer in Massachusetts, is seeing the impact already. In April, his dealership sold 104 used cars, compared with 65 a year ago. It sold 99 new vehicles, four fewer than a year ago.

“What that tells me is new sales are stagnant,” he said.

Correction: May 2, 2017

An earlier version of this article misidentified the Massachusetts city in which Silko Honda is located. It is Raynham, not Taunton.

Continue reading the main story

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

You may also like

Arbitrum Price Prediction: 10% losses likely for holders ahead of $107 million worth of cliff token unlocks

Arbitrum network will unleash 92.65 million tokens to