The auto industry is nothing if not cyclical. The past several years have been spent on the brighter side, with auto plants across the country reaching 211,000 workers, up 55 percent since the recession and the rescue driven by the federal government. Now the momentum is slowing, June the sixth consecutive month of declining sales.
The expectation is that annual sales will fall below 17 million for the first time since 2014. Ford has announced plans to generate cost-savings, including as many as 20,000 layoffs worldwide. General Motors has shut down production lines. Fiat Chrysler has trimmed its work force.
As Mark Muro of the Brookings Institution explains in a recent post, this turn comes at a time when the auto industry plays an especially crucial role in the state of manufacturing. He points out that the auto sector has delivered about 40 percent of the country’s manufacturing employment gains during the past two years. Narrow the scope to the past 15 months, and the share climbs to 80 percent.
Which manufacturers will pick up the slack? That isn’t clear, Muro adding that in 39 of the largest 100 metropolitan areas, manufacturing growth has turned negative since the start of 2016.
The situation also is more subtle than the cyclical concept suggests. Muro and others note that the slowdown reflects the ebbing of pent-up demand from the recession, consumers making car purchases they had put off. Yet low gas prices mean sales of SUVs and trucks remain stronger, up around 4 percent the past year.
So, in communities where larger vehicles are made, the slowdown may be little noticed.
With the Trump White House looking to re-negotiate the North American Free Trade Agreement, a bit of caution is due: The improved auto supply lines resulting from the accord have made the industry as a whole more competitive globally. Add that the auto rescue of the Obama White House has left automakers in position to be more responsive to changing market conditions.
What deserves amplification is something that builds on the analysis of Mark Muro about the role of automakers. This recovery has been sustained, now in its eighth year. It also has been modest.
Advanced manufacturing may not generate jobs at a high rate. It does bring innovation and a diversifying element. It matters greatly that cities and regions look for ways to help local manufacturers and other businesses expand, through such things as exports, foreign investment, an improved work force or an engaged university. An auto industry cycling down offers a reminder of what is required for local and regional economies to stay on the up.
This editorial appeared in the Akron Beacon Journal on Saturday, July 8.