Keep on truckin’

Last year Americans purchased about 14.5 million new cars.

Actually, they bought about 4.5 million new cars — mostly foreign — and about 10 million new SUVS and pick-up trucks — mostly domestic.

The top selling sedans were the Toyota Camry and Corolla, and the Honda Civic. Indeed. when you read through a list of the top selling cars in the US, it’s mostly Japanese, Korean and European makes; Chrysler, GM and Ford are noticeably absent. Meanwhile, the list of the top selling SUVs/utes is the exact opposite.

 Top 25 vehicle sales, USA, by segment and country

Source: http://www.goodcarbadcar.net/

Last week’s decision by General Motors to “unallocate” production across five North American plants is the consequence of a broader trend. Ford, General Motors and Chrysler badges have been falling down the list of top selling sedans since at least the GFC — Japanese, Korean and European models proving to be far more competitive. But they have found success in the lucrative SUV, cross over and utility markets. Falling petrol prices, rising incomes and improvements in comfort and safety providing significant growth in demand.

GMs cuts targeted six four-door models — the Chevrolet Volt, Impala and Cruze, the Buick LaCrosse, and the Cadillac CT6 and XTS. This leaves the line-up predominantly big and small SUVs. Ford announced similar cuts earlier in the year when they announced plans to reduce their line up by 80 per cent, by again dropping sedans and hatchbacks. In fact, it’s expected that truck sales will account for around 90 per cent of GM, Ford and Chrysler sales in North America by 2022.

With an unallocation of production comes an unallocation of jobs. Approximately 15 thousand (direct) jobs will be lost as a result — including 3,700 factory workers in the USA (Detroit, Baltimore and Ohio) and 2,500 factory workers in Canada (Oshawa, near Toronto). Interestingly, more than half (8,000) of the total job losses are white collar jobs. (For reference, in 2017 GM employed 103 thousand salaried and hourly staff throughout North America.)

And then there are likely the indirect job losses. Estimates (to be taken with a bag of salt) suggest that as many as 15,000 jobs could be lost in Canada’s auto-parts suppliers for example.

For GM (and the other US producers) the immediate future is trucks — others can own the sedan and small car segments. The more distant future might be electric car and autonomous vehicles. Last week saw the millionth electric vehicle sold in the US. At one stage GM had planned to launch 20 EVs by 2023, which could be central to “reallocation” efforts down the track. (The real electric vehicle game though is China — which purchases almost 2 in every 5 electric cars, and 99 out 100 electric vehicles.)

The messaging from GM about this move has been one of strategy not competitiveness. GM’s GM, Mary Barra, informed the President that this was not a negotiating tactic, the decision had been made. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success”. This poses an interesting conundrum for those advocating for protectionist interventions in an effort to make US cars more cost competitive.