DETROIT (AP) — Defying a wave of layoffs that has sent the United States (US) job market into its worst catastrophe on record, at least one major industry is making a comeback: Tens of thousands of auto workers are returning to factories that have been shuttered since mid-March due to fears of spreading the coronavirus.
Until now, it was mostly hair salons, restaurants, tattoo parlors and other small businesses reopening in some parts of the country. But the auto industry is among the first major sectors of the economy to restart its engine. With it comes about 133,000 US workers pouring back into assembly plants that will open in the coming week, or just over half of the industry’s workforce before the pandemic, according to estimates by The Associated Press (AP). In addition, parts-making companies began cranking this week to get components flowing, adding thousands more workers.
Looming in the background is an economy decimated by the pandemic. Nearly three million laid-off workers applied for unemployment benefits last week, raising the total seeking aid to about 36 million.
Although some states have begun to let selected businesses reopen, workers are still reporting difficulty getting unemployment benefits. Freelance, gig and self-employed workers are struggling. Even the auto sector won’t see a full return to normal yet, and if people don’t start buying vehicles again, the workers could be sent home. Yet automakers said there’s enough pent-up demand, especially for pickup trucks, to get factories humming again.
That could help states slow the drain on their unemployment benefit funds. In Michigan, where over one-third of the labour force sought benefits, the fund fell from USD4.6 billion before the pandemic to USD4.1 billion on April 30, said Director of the state Department of Labor and Economic Opportunity Jeff Donofrio. Some returning auto employees could work part-time and get still some unemployment benefits, but federal programmes could cover part of their payments, he said. At Ford, where about 47,000 US factory workers will return by next week, there’s optimism that consumer demand will accompany them. Chief Operating Officer Jim Farley said the company, using data collected from new Ford models from the past two years, is seeing sales recover.
In Europe, China and the US, Ford has found a correlation between the number of trips people take and auto sales, with trips increasing as restrictions eased.
“We started to see in early April a change where people started to take more trips,” Farley said on Thursday. “The (sales) decline stopped and our retail sales improved a lot.”
Auto sales in China, where the virus peaked before the US, could be harbinger of things to come. China sales fell in 2.6 per cent in April but losses narrowed from the 48 per cent free-fall in March. Production at many plants is nearly back to normal after being shut down in January and February.
Volkswagen, Honda, Mercedes and Ford reported no virus cases among employees since reopening. Fiat Chrysler had two, but said the workers never entered factories.
Things are worse in Europe, where sales plummeted 55 per cent in March and some factories are running only at 40 per cent of capacity. The pandemic has affected over 1.1 million European auto industry workers, almost half the sector’s manufacturing jobs. Most are getting paid through government support. A survey of auto parts suppliers shows that a third of executives believe it will take at least two years for the industry to recover.
US sales fell 46 per cent in April as the virus took hold, but analysts are forecasting a smaller decline of 30 per cent in May. Sales have been juiced by huge incentives, with some automakers offering zero per cent financing for as long as seven years.
Pickup trucks are giving automakers the most hope, said Senior Vice President at LMC Automotive Jeff Schuster, a consulting firm.