As Trump’s first 100 Days ended and monthly numbers were reported there was an apparent disconnect in the automotive industry. Consumer and industry confidence are at their highest points in years, however, automotive sales were trending downward for the fourth consecutive month. The ramifications of this downward trend are especially harmful to jobs in this vertically integrated industry.
The new administration has pledged to bring jobs back to America, highlighted by Trump’s pledge to bring back automotive jobs from Mexico and China. This pledge has fallen into the background as the climate it was made in has changed dramatically. When promised, the auto industry was riding high on five-plus years of record profits. This made the industry an attractive target for domestic growth. Now that the industry’s sales have cooled, not only is the return of domestic jobs unlikely, but it is more than likely that domestic and foreign jobs will be lost. Inventories are building as turnover is up from 60 to 100 days.
First, this will lead to the loss of jobs in the the automotive giants and their production facilities. As production ceases in Detroit and around the world, the part suppliers will also feel the affects. When car production is halted, the inventories of suppliers will begin to build with the lack of a willing input good market. The obvious result is layoffs throughout the vertical industry. These suppliers have the luxury of diversification into other markets such as sea, air, and rail industries to soften the blow, however.
The city of Detroit may be the first major market to feel the effects of this downturn in sales. Motor City has 13 OEM assembly centers and nearly three times as many suppliers to them. In the recent 7 year run of record sales, over $23 billion has been pushed into the state’s once bankrupt industry. This sales downturn will result in a huge hit to the automotive industry’s $37B GDP footprint on the state. Tax revenues will once again be down in a city just regaining traction.