Solid December sales are expected to nudge 2016 to a second straight record for the U.S. light-vehicle market, but factory workers in towns such as Lordstown, Ohio, aren’t dancing in the streets.
Demand for small and midsize passenger cars has collapsed amid a sustained run of cheap fuel, pushing buyers to gravitate toward sport utilities, crossover wagons and pickups. While selling an increasing amount of pricey light trucks is good for Detroit’s bottom line, it has been bad for the people Glenn Johnson has been working with at General Motors Co.’s plant in northeast Ohio, which makes the Chevrolet Cruze compact car.
“The small car has been very good to Lordstown,” said Mr. Johnson, who is president of the United Auto Workers local that represents the Lordstown factory’s workers. “But now it’s a perfect storm: low gas prices and people have disposable income to buy bigger, more expensive vehicles.”
GM plans to cut about 3,300 jobs at passenger-car factories in Ohio and Michigan to deal with the shift. Mr. Johnson, who has been at the Lordstown plant for about 40 years and has weathered the industry’s booms and busts and GM’s bankruptcy, is waiting to see which of his colleagues will be among 1,200 workers cut after the holidays.
Expected strong December auto sales may paint two portraits of the industry. One picture is of an industry riding a seven-year growth streak, the longest such run since the 1920s and a key ingredient to America’s broader economic health. The other is of an industry that has a glut of passenger cars clogging dealer lots, forcing auto makers to offer deep discounts or dump unwanted products to daily rental operators.
Car companies are paying a price for making “the wrong call” on installing too much factory capacity devoted to bread-and-butter sedans or compact cars, said Barclays auto analyst Brian Johnson in a research note. From 2010 to 2015, the industry added capacity to its North American factories for an additional 1.2 million cars annually, while installing capacity for roughly 800,000 trucks, SUVs and crossovers, Barclays’s Mr. Johnson estimated.
GM hasn’t been the only company to feel the consequences of the shift, as Fiat Chrysler Automobiles NV in July cut 1,300 positions at a sedan factory in Sterling Heights, Mich. Ford Motor Co., meanwhile, has been slowing production without cutting permanent jobs and plans to backfill U.S. production of slumping cars with output of pickups and SUVs.
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