US Auto Overcapacity At 10 Plants 20,000 Direct Jobs: Not Just A "Car" Recession

The collapse of the sedan market has left Detroit automakers with too many plants. An auto recession has begun.

Please consider The Next American Car Recession Has Already Started

Detroit is in the grips of a car recession marked by the collapse of demand for traditional sedans, which accounted for half the market just six years ago. Buyers have made a mass exodus out of classic family cars and into sport utility vehicles. Familiar sedan models such as the Honda Accord and the Ford Fusion made up a record low 30 percent of U.S. sales in 2018, and things will only get worse.

Sales of the passenger-car body style that’s dominated the industry since the Model T will sink to 21.5 percent of the U.S. market by 2025, according to researchers at LMC Automotive, relegating sedans to fringe products. That leaves automakers with excess factory capacity that can turn out about 3 million more vehicles than buyers want. And overcapacity is precisely what spurred losses the last time a recession wracked the industry.

An optimist might seek solace in the better-than-expected profit prediction issued Friday by General Motors Co. But a deeper look at the numbers reveals that the biggest contribution to the company’s rosy forecast were cost-cutting plans—including closing five North American plants—which it said will help boost profit this year by as much as $2.5 billion.

The overcapacity plaguing U.S. automakers is the equivalent of 10 excess plants, which would account for at least 20,000 jobs directly, and thousands more as it ripples through the suppliers and support services to the massive industry. “GM has taken some actions, but they still have some well-underutilized plants,” Schuster said. “So we may not be done with this yet.”

GM Halts Sales Reporting

On April 3, 2018, GM announced it would end monthly sales reports. Its pretext was that "quarterly figures were more useful." Yeah, right.

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