Mounting auto industry layoffs underscore rocky EV transition, UAW contracts

The number of automotive-related layoffs and shift cuts has mounted in recent months, especially in Michigan, but the state’s economy appears to be chugging along fine despite the volatility of its most important industry.

It is a curious dynamic that underscores the once-in-a-century automotive upheaval and a persistently strong labor market, experts say.

The Detroit 3 and their suppliers have implemented thousands of layoffs over the past few months in the wake of entering costly UAW contracts and confronting the reality of underwhelming EV sales. This is happening as carmakers spend billions in an EV arms race that China is winning.

“It’s a very uncertain future for these companies, and they’re going to have to fight tooth and nail to make it through this transition,” said Marick Masters, business professor at Wayne State University in Detroit, who specializes in labor. “Right now, they face not only the typical problems associated with the economy but more structural ones that are associated with the transition to EVs."

General Motors told the state in a WARN notice last December it would lay off 1,300 employees at plants in Lansing and Orion Township, where the launch of electric pickups has been delayed at least a year. The company said it would offer displaced workers opportunities elsewhere.

Stellantis told the state it would lay off up to 2,450 at the Detroit Mack Assembly Plant starting in February, though “only a few hundred” employees were permanently cut, company spokeswoman Jodi Tinson told Crain’s Detroit Business, declining to provide a number. Additionally, the company cut about 400 salaried employees last month, mostly in Auburn Hills, with more anticipated.

Meanwhile, Ford Motor Co. has slashed shifts dramatically at Rouge Electric Vehicle Center in Dearborn, Mich., where planned output of the F-150 Lightning was reduced by half. The move impacted around 1,400 workers, some of which were offered work at other plants.

Volatility is typical in the industry, but not to this extent, Masters said. Automakers are moving quickly to become leaner while responding to fast changing demand signals, by making cuts at an EV plant while staffing up at a hybrid facility, for example.

Jonathan Smith, senior chief deputy director for Michigan’s Department of Labor and Economic Opportunity, said the state’s labor market is strong and unemployment is historically low at 3.9 percent through February.

“So why are we seeing layoffs? Part of it is sometimes we have skills mismatches,” he said. “So if you think about a company making new investments to be globally competitive, they might need folks with a different set of skills than they had in the past.”

Light vehicle sales are up from last year, signaling a market normalizing after years of supply chain disruption, said Glenn Stevens, executive director of MICHauto. Yet EV sales declined in the first quarter.

"EV sales and adoption are not accelerating as planned, and this is slowing investment and new capacity, which has caused a reduction in shifts at facilities currently manufacturing EVs, an adjustment in battery production investment, and a production start delay at multiple EV assembly plants," Stevens said in an email.

Parts manufacturers have been hit hard by production delays and volume cuts from customers struggling to figure out their business. Just this year there have been around 1,200 layoffs by auto parts and service providers ranging from chassis manufacturers to trucking companies.

Last year ended with a spate of supplier layoffs, too. Companies including Magna, Antolin, Dana and Dakkota informed the state right before the holidays of their intentions to lay off hundreds of employees.

Jobless claims in the state spiked at 13,000 in January, the highest point in a year, according to state data. That number had dropped to a more typical 5,000 as of last week.

WARN notices to the state, required of employers for mass layoffs and plant closures, don’t show the full picture, though. Tier 1 and sub-tier suppliers have been making smaller rounds of cuts in recent weeks and months, supplier executives have told Crain’s, an affiliate of Automotive News.

Waymon Halty, vice president of UAW Local 155, said most of the 59 supplier factories under his local have been hit, including in the Detroit area, with third shifts basically wiped away at just-in-time plants.

“This is out of the ordinary, especially after January,” Halty told Crain’s. “We don’t typically see this, not this big anyway. You might see one of the automakers kind of pull back a little bit, but not all three.”

The upswing in auto supplier layoffs might not be reflected in unemployment data because it is muted by the strong labor market. Manufacturers writ large have struggled for the past several years to find workers, and that’s abated only partially, executives have said.

“I do think because we have a pretty robust job market, if someone is laid off in a manufacturing production job making average wages in that sector in that region, they should be able to find similar work pretty quickly in today’s labor market,” Smith said.

Auto supplier workers are also leaving the industry at unprecedented rates as employers such as Amazon offer comparable, if not better, wages and benefits. The number of workers in motor vehicle parts manufacturing in Michigan was 120,600 in February, down 4 percent from a year earlier and nearly 50 percent from a peak 25 years ago of 230,000, according to the most recent data from the Bureau of Labor Statistics.

At the macro level, U.S. light vehicle sales rose 5.5 percent in March, driven in part by discounts, and marked 20 straight months of year-over-year gains. And the U.S. added 303,000 jobs last month, outpacing expectations, according to the Bureau of Labor Statistics. Those data points don’t suggest economic trouble on the horizon.

“The layoffs we’re seeing are not necessarily attributable to the financial position of a company, they’re attributable to the company balancing its workforce needs across its different investment categories,” Smith said.