GM, Ford are shrinking their workforces. Here’s why.

By GMFOXBusiness

White House will delay imposing auto tariffs: Sources

FBN’s Edward Lawrence reports that the White House will delay the imposing auto tariffs amid the U.S.-China trade dispute.

General Motors and Ford Motor Co. are both cutting thousands of jobs as the carmakers grapple with a sales slowdown in key markets, shifting consumer vehicle preferences and more stringent environmental regulations in countries around the globe.

Continue Reading Below

Ford announced on Monday it would reduce its international, white-collar workforce by 7,000 jobs, part of the Dearborn, Michigan-based company’s $11 billion restructuring effort. GM announced last year that it would shutter several North American plants and cut as many as 14,000 jobs.

Underscoring the announcements are shifting production lines at the two largest U.S. auto companies, as consumer interest pivots from passenger cars to sports utility vehicles and pickups.

Stricter emissions requirements in countries like China and those within the European Union, coupled with a rising interest in emissions-free vehicles, are accelerating a pivot towards electric cars. 

GM, Ford and others are also pouring millions into autonomous vehicles, banking on the hope that the technology will define the future of automotive production. 

MORE FROM FOXBUSINESS.COM...

Meanwhile, President Trump's tariffs on steel and aluminum imports have added billions of dollars in cost. The industry received some reprieve after Canada and Mexico reached agreements last week with the U.S. to lift the levies.

But as carmakers invest significantly in new models, a global slowdown in sales is causing concern among analysts and other industry experts that profits could be under pressure in 2019.

In China, the most important market for carmakers, sales decreased 14.6 percent in April to 1.98 million vehicles, according to the China Association of Automobile Manufacturers. For Ford, sales in the region dropped nearly 40 percent in 2018, while GM’s fell 10 percent last year.

Both companies have outlined a strategy for the region that involves a revamped product lineup. Ford plans to manufacture a new Explorer and Lincoln Corsair in China, a move executives say will cut down on costs.

“It’s a huge, huge improvement in terms of the business model for each one of those,” outgoing CFO Bob Shanks said recently. “Material costs are lower in China, labor is lower in China, we can be closer to the market in terms of consumer demand.”

Meanwhile, GM is preparing to launch roughly 20 new or updated models in the country, including new Cadillac crossovers.

“Auto companies globally are contemplating life where global production has greater downside risk than upside…particularly as we see the impact of China,” Morgan Stanley analyst Adam Jonas wrote in a recent research note.

TickerSecurityLastChange%Chg
FFORD MOTOR COMPANY9.30-0.15-1.59%
GMGENERAL MOTORS COMPANY37.21-1.65-4.25%

There are bright spots for domestic manufacturers though. Both Ford and GM, for example, continue to see robust demand in North America for pickup trucks.

“With gas cheap and new crossovers and pickups coming out…we expect continued strong light truck penetration for the industry, which is already about 70% of new vehicles sold each month,” Morningstar analyst David Whiston wrote in a recent note.

GM is rolling out its next-generation of heavy-duty trucks in the second half of 2019. Ford’s wildly popular F-150 will get a redesign in 2020, the first in six years.

Tesla and startup Rivian, however, could put a dent into the market share of the Detroit carmakers with their pending all-electric pickups. Ford announced in April it would invest $500 million in Amazon-backed Rivian and use its proprietary platform to build a new emissions-free vehicle.

Fiat Chrysler is also putting pressure on Ford and GM, the top two sellers of pickup trucks in U.S., respectively, as sales of its Ram pickup continue to rise.

Autonomous vehicle production continues to be a focus for both Ford and GM but interest in the technology could be waning. Half of the U.S. population, for example, believes that autonomous vehicles will be unsafe, a rise from 47 percent in 2018, according to Deloitte’s annual automotive consumer study.

GM is expected to launch a commercial self-driving service later this year, though executives have declined to put a strict timeline on the effort. Ford is on a longer timeline and doesn’t intend to launch an autonomous fleet until 2021.

CLICK HERE TO GET THE FOX BUSINESS APP

Overall, earnings at two of the largest global automakers are reflecting the changing face of the companies.

At Ford, adjusted profits in the first quarter were 44 cents per share, significantly higher than Wall Street expected. The company lost $28 million in China in the three months through March, less than a $150 million loss a year ago.