Trump’s job promises face challenge in auto sector

President Trump’s promises to revive the struggling American manufacturing industry faces new headwinds as the automotive sector, the largest driver of manufacturing jobs, announces thousands of new layoffs. 

The layoffs come as the auto industry faces declining growth after a post-recession rebound.

In less than a year, Ford has said it will cut as many as 1,400 jobs. General Motors has cut production at four U.S. assembly lines, costing 4,400 workers their jobs. Fiat Chrysler laid off another 1,300 workers at their assembly line in Detroit.

{mosads}Mark Muro, a senior fellow at the Brookings Institution’s Metropolitan Policy Program, estimates that auto jobs represented 60 to 80 percent of overall manufacturing job growth after the recession. That growth came as Americans made auto purchases they had delayed during the recession, though now those catch-up sales have plateaued.

“I think that when we talk about making American great again, a lot of that is tied up in how auto manufacturing is doing,” Muro said. “This next period, auto will not drive the overall manufacturing [sector], will not generate significant manufacturing employment.

Beyond those announced layoffs, Muro’s research shows the auto industry has shed jobs in 45 of the nation’s 100 largest metropolitan areas in the last year. 

“The question is, what’s going to happen now?” Muro asked. “One possibility is auto goes flat and nothing else really picks up, so we really have a very tough manufacturing story for the next few years.”

When Ford announced last year that it would not move production of its Ford Focus to Mexico, Trump hailed the decision as a victory. He didn’t offer a comment this week when Ford said it would move production of its Focus model to China, a decision that could hurt the broader American auto sector. 

Industry analysts say automotive jobs that move to Mexico still benefit the United States, where parts makers still employ tens of thousands of people. Automotive manufacturing in China is much less likely to rely on American-made parts.

Cyclical slowdowns are normal in an industry that has ebbed and flowed for generations. 

“We’ve had an extraordinary rebound in auto sales, to essentially record levels, and so nobody should be surprised if the industry softens a bit,” said Steven Rattner, who led the Obama administration’s task force on the auto industry at the height of the recession. “It’s a cyclical industry, and sometimes people buy more cars, and sometimes they buy fewer cars.”

Yet some industry analysts believe this slowdown presages a broader shift in the thinking of major auto companies. 

They say that trends affecting the industry are likely to be a drag on manufacturing, though U.S. companies are likely to increase their hiring in other fields.

With the prevalence of ride-hailing companies like Uber and Lyft, and the nascent beginnings of self-driving automobiles, families are likely to have less use for multiple vehicles. 

Auto companies “have always been a personal transportation provider, and it’s just that the nature of how that is provided is shifting, from an ownership platform to none of us own a car,” said Tony Hughes, managing director at Moody’s Analytics’ economics division. “But there is this one car that’s owned by these people called Uber or Lyft.”

Auto companies are making investments in different, more technology-oriented fields necessary to compete in the self-driving space. These fields may not have the same need for manufacturing jobs.

Reid Wilk, an auto industry advisor for Strategy&, the strategic consulting team affiliated with PwC, said auto companies are focusing on things like artificial intelligence software.

“There is a battle for talent across industries in that type of space, and we see aggressive hiring globally in the auto industry,” Wilk said. “The net, at least in terms of the product development and innovation space, is a plus.”

By shifting resources from manufacturing positions to technology jobs, companies are likely to rely on smaller workforces, Rattner said.

“Technology companies simply don’t use the same amount of labor as manufacturers do, so you don’t get a one-for-one replacement,” he said.

The shift toward technology is also likely to change the types of vehicles rolling off assembly lines, industry analysts said. As ride-sharing becomes an increasing proportion of the auto market, companies are likely to craft more homogenous vehicles, in the same way the taxi industry largely uses standardized types of vehicles. 

The auto industry today makes much of its money on specialized vehicles for specific markets: Smaller sports cars and larger pickup trucks do particularly well in the American market.

“If the number of journeys taken by commuters in homogenous driverless ride-shares increases, it’s sort of like the monopoly profits enjoyed by the auto industry selling custom niche products to niche clientele will reduce,” Hughes said. “The biggest threat to the auto industry is that the nature of those vehicles will be much more homogenous.”

The rise of driverless vehicles and ride-hailing companies represents “a fairly transformational way in which people use their cars,” Rattner said. “That means fewer cars, period, and that means fewer jobs. And that won’t be offset by technology jobs.”

CORRECTION: An initial version of this story inaccurately described job cuts at Ford. The company expects to cut 1,400 jobs.