US car sales shift to lower gear

Steadily-rising US auto sales helped fuel the economic recovery, but sales have shifted into lower gear even as President Donald Trump counts on carmakers to provide a lift to his economic plans.

And after adding thousands of jobs since the financial crisis to meet rising demand for new vehicles, US carmakers also have begun to idle workers for months at a time.

Trump has touted the auto sector - which he previously lambasted for moving production to Mexico - as proof of his programme's success. "We're going to have expansion," he told reporters last week.

"We already do. You look at what's happening with Ford and with General Motors in Michigan and Ohio. You look at the tremendous number of jobs that are being announced in so many different fields. That's what I'm proud of, and that's what we want to focus our energy on."

But the data is gloomier.

Following seven years of steady growth that led to sales records in 2015 and 2016, deliveries of new vehicles in the US dropped 4.7 per cent in April in one of the steepest declines since the 2008-09 recession, AutoData reported.

Analysts at IHS Automotive have cut their forecast for US sales, which are expected to fall for the first time since the financial crisis.

"Auto demand remains at muted levels," IHS analyst Chris Hopson pointed out.

Earlier this year, in response to prodding and threats from Trump over their overseas operations, Ford, GM and Fiat Chrysler announced plans to add jobs at their US facilities.

Ford even cancelled construction of a plant in Mexico, although it did so largely due to falling demand for passenger cars.

GM announced plans to add jobs in Michigan even as it moving ahead with cuts to production. But so far this yaer, GM has idled 3,000 workers at three plants in Michigan and another in Tennessee. Ford scrapped 130 workers at the Ohio Assembly Plant in Avon, Ohio, and now plans to cut another 1,400 salaried jobs.

And Fiat Chrysler Automobiles laid off hundreds of workers in Sterling Heights, Michigan, Toledo, Ohio and Belvidere, Illinois. Some FCA workers have been called back in Belvidere, but the company has not set a timetable for recalling the 6,000 workers idled in Sterling Heights and Toledo.

AutoData's reports show US sales for GM, Ford and Fiat Chrysler, the heart of the American car industry, have experienced the biggest drops so far this year. Ford's sale are down 5.1 per cent, GM's have dropped 1.1. And Toyota, Honda and Nissan, all of which have large US production, also reported drops in sales in April.

"Car sales have peaked," said Danielle DiMartino Booth, founder of Money Strong, an economic consulting firm. "Fully five per cent of US jobs are tied to autos. The recovery is simply too tenuous to withstand a body blow to this sector."

Jessica Caldwell, an analyst at Edmunds.com, said the end of the low interest rates that helped drive car sales is a key factor.

Car loans "are becoming less enticing for consumers, which inevitably creates further drag on new vehicle sales," she said.

While wrestling with production cuts, GM and Ford also are facing grumbling from shareholders.

Citing GM's faltering stock price, Greenlight Capital, a New York based hedge fund, has put up an alternative slate of directors that will be voted on at next month's shareholders meeting.

"You say that your main priority is to provide long-term shareholder value," one shareholder said during Ford's annual shareholders meeting. "Losing 40 per cent of the value since Mark [Fields] took over as CEO doesn't seem to be upholding that pledge."

In response, William Clay Ford Jr, Ford's executive chairman and the great grandson of the company's founder, said Wall Street has historically undervalued automakers, even when they are earning substantial profits

Source: Khaleej Times