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Layoffs Grip Auto Sector Amid Challenging Operating Backdrop
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The year 2019 turned out to be one of the worst years for auto workers across the globe with respect to job losses. Shrinking vehicle sales amid fears of economic slowdown along with a tectonic shift in vehicle technology took a toll on the auto sector. Automakers have thus resorted to massive downsizing in order to maximize efficiency as they brace themselves for the next generation of mobility. As global vehicle sales slow down after a decade of growth, car companies are slashing workforce at the fastest pace since the Great Recession of 2008.
Car Industry Undergoing Massive Transformation
The industry is witnessing considerable changes in operating environment. Widespread usage of technology and rapid digitalization are resulting in fundamental restructuring of the automotive market. A host of factors such as pollution issues, technical superiority, stricter fuel-emission standards and increasing adoption by both automakers and customers have turned the fortunes in favor of electric vehicles. Fast progress in artificial intelligence and machine learning is making the seemingly utopian concept of driverless cars a reality.
New emission standards, weak credit growth and rise in ride-sharing services and used car sales are weighing on demand for new vehicle sales.A study by Fitch Ratings claims that global car sales are anticipated to fall around 4% year over year in 2019, marking the biggest decline since 2008. China, the world’s largest automobile market, is also mired in auto sales slump. Carmakers in China, battling an unprecedented slump amid economic slowdown concerns, are expected to witness a second straight annual drop in vehicle sales in 2019. Sales in the United States are witnessing a declining trend and vehicle sales are expected to drop 2% year over year in 2019.
Slowdown in vehicle sales will continue to clip automakers’ profit levels, which are already under pressure due to increased R&D investments for electric and autonomous driving technologies.Importantly, car companies have to develop and upgrade their offerings to remain on par with the evolving trends in the automotive market.
Auto Biggies Begin Restructuring
A shift toward electric and self-driving vehicles has made it necessary for automakers to reorient their business model. Technological development with regard to electric, autonomous and connected cars demand huge investment and even the auto biggies are struggling to generate solid margins amid high capex. As such, automakers are now focused on cost-cutting initiatives and reassessment of their workforce to tackle margin erosion.
U.S. auto biggies General Motors (GM - Free Report) and Ford (F - Free Report) laid down significant restructuring plans to control costs, capitalize on future mobility opportunities and improve core performance. Meanwhile, another major U.S. carmaker Fiat Chrysler took a different path by announcing a 50:50 merger deal with PSA Groupe to share R&D costs for funding new technologies.
Japanese auto majors Honda Motor (HMC - Free Report) and Nissan Motor (NSANY - Free Report) also unveiled radical restructuring program to control costs and optimize production capacity. Amid high R&D expenses and regulatory challenges, German car giants including Volkswagen (VWAGY - Free Report) and Daimler AG also came up with major reorganization plans this year.
As automakers are rapidly pivoting from traditional combustion engines to electric cars, they are aggressively trimming jobs to cut costs.
Downsizing on the Rise
Although the job cuts are more pronounced in the United States, United Kingdom and Germany, faster-growing economies are faring no better and automakers are scaling back workforce and operations there as well. Contracting automobile sales have triggered massive jobs cuts in China, India, Brazil and other emerging economies. Chinese EV startup NIO, which is grappling with huge losses, retrenched about 20% of its workforce (more than 2,000 jobs) by September 2019.
Here’s a rundown of major job cuts announced by auto giants in 2019.
In January, Tesla stated plans to slash headcount by more than 3000 to streamline its operations and prepare for tough times ahead.
General Motors, the top automaker in the United States, announced its plans to cut more than 14,000 jobs and to shut down seven of its manufacturing plants in a massive restructuring to realign its workforce and plants to rev up production of EVs.While the plan was announced in November 2018, the majority of the restructuring was undertaken in 2019.The reorganization will enable the company to save around $6 billion by the end of 2020.
In March, Fiat announced its plans to retrench 1,500 personnel at its minivan plant in Canada, in a bid to better align its production with global demand.
In June, Ford announced its plans to slash 12,000 jobs across European operations and shut down five of its plants by the end of 2020 in a bid to restructure its sluggish European operations. This announcement came just after a month the #2 U.S. carmaker declared plans to slash 7,000 white-collar jobs, constituting 10% of its global workforce, as part of a companywide redesign. The cost cutting effort would save the company around $600 million a year.
Apart from the EV pioneer Tesla and Detroit 3 automakers, major German carmakers are also resorting to massive job cuts amid electric overhaul to keep costs in check.
In September, BMW AG stated plansto lay off around 6,000 employees in Germany by 2022 as part of its ongoing cost-savings effort.
In November, Daimler announced that it would axe at least 10,000 jobs as it seeks to fund the switch to EVs. The firm intends to cut staff costs by around $1.54 billion by 2022 and reduce the number of management positions worldwide by 10%.
In March, Volkswagen announced plans to cut 5000-7000 jobs by 2023 in new savings drive amid digital overhaul. The move will help the company lower costs by $6.6 billion. In November, the firm’s premium unit Audi declared its intent to trim 9,500 jobs by 2025, freeing up $6.61 billion to finance its shift toward green vehicles.
Japanese auto biggies are also joining the massive retrenchment move.
In February, Honda, as part of its global manufacturing restructuring, confirmed its plans to shut down its Swindon car plant in the United Kingdom by 2021, risking the loss of 3,500 job cuts.
In July, Nissan Motor announced its plans to axe nearly one tenth of its workforce to rein in costs. The firm intends to reduce at least 12,500 positions globally by 2023, marking its deepest downsizing since 2009.
Last Words
Indeed, automakers are set for the biggest job cull since 2008 as around 80,000 jobs are set to be lost over the next few years, per Bloomberg. From a future competitive standpoint, carmakers will have to balance revenue generation with broader challenges and escalating expenses. Eventually, the sector’s success will depend on how well the players manage costs incurred for mass manufacturing and evolving technology.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
Image: Bigstock
Layoffs Grip Auto Sector Amid Challenging Operating Backdrop
The year 2019 turned out to be one of the worst years for auto workers across the globe with respect to job losses. Shrinking vehicle sales amid fears of economic slowdown along with a tectonic shift in vehicle technology took a toll on the auto sector. Automakers have thus resorted to massive downsizing in order to maximize efficiency as they brace themselves for the next generation of mobility. As global vehicle sales slow down after a decade of growth, car companies are slashing workforce at the fastest pace since the Great Recession of 2008.
Car Industry Undergoing Massive Transformation
The industry is witnessing considerable changes in operating environment. Widespread usage of technology and rapid digitalization are resulting in fundamental restructuring of the automotive market. A host of factors such as pollution issues, technical superiority, stricter fuel-emission standards and increasing adoption by both automakers and customers have turned the fortunes in favor of electric vehicles. Fast progress in artificial intelligence and machine learning is making the seemingly utopian concept of driverless cars a reality.
New emission standards, weak credit growth and rise in ride-sharing services and used car sales are weighing on demand for new vehicle sales.A study by Fitch Ratings claims that global car sales are anticipated to fall around 4% year over year in 2019, marking the biggest decline since 2008. China, the world’s largest automobile market, is also mired in auto sales slump. Carmakers in China, battling an unprecedented slump amid economic slowdown concerns, are expected to witness a second straight annual drop in vehicle sales in 2019. Sales in the United States are witnessing a declining trend and vehicle sales are expected to drop 2% year over year in 2019.
Slowdown in vehicle sales will continue to clip automakers’ profit levels, which are already under pressure due to increased R&D investments for electric and autonomous driving technologies.Importantly, car companies have to develop and upgrade their offerings to remain on par with the evolving trends in the automotive market.
Auto Biggies Begin Restructuring
A shift toward electric and self-driving vehicles has made it necessary for automakers to reorient their business model. Technological development with regard to electric, autonomous and connected cars demand huge investment and even the auto biggies are struggling to generate solid margins amid high capex. As such, automakers are now focused on cost-cutting initiatives and reassessment of their workforce to tackle margin erosion.
Further, with Tesla (TSLA - Free Report) on track toward global dominance with respect to EVs, other major auto giants are buckling up to stay competitive. Tesla carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. auto biggies General Motors (GM - Free Report) and Ford (F - Free Report) laid down significant restructuring plans to control costs, capitalize on future mobility opportunities and improve core performance. Meanwhile, another major U.S. carmaker Fiat Chrysler took a different path by announcing a 50:50 merger deal with PSA Groupe to share R&D costs for funding new technologies.
Japanese auto majors Honda Motor (HMC - Free Report) and Nissan Motor (NSANY - Free Report) also unveiled radical restructuring program to control costs and optimize production capacity. Amid high R&D expenses and regulatory challenges, German car giants including Volkswagen (VWAGY - Free Report) and Daimler AG also came up with major reorganization plans this year.
As automakers are rapidly pivoting from traditional combustion engines to electric cars, they are aggressively trimming jobs to cut costs.
Downsizing on the Rise
Although the job cuts are more pronounced in the United States, United Kingdom and Germany, faster-growing economies are faring no better and automakers are scaling back workforce and operations there as well. Contracting automobile sales have triggered massive jobs cuts in China, India, Brazil and other emerging economies. Chinese EV startup NIO, which is grappling with huge losses, retrenched about 20% of its workforce (more than 2,000 jobs) by September 2019.
Here’s a rundown of major job cuts announced by auto giants in 2019.
In January, Tesla stated plans to slash headcount by more than 3000 to streamline its operations and prepare for tough times ahead.
General Motors, the top automaker in the United States, announced its plans to cut more than 14,000 jobs and to shut down seven of its manufacturing plants in a massive restructuring to realign its workforce and plants to rev up production of EVs.While the plan was announced in November 2018, the majority of the restructuring was undertaken in 2019.The reorganization will enable the company to save around $6 billion by the end of 2020.
In March, Fiat announced its plans to retrench 1,500 personnel at its minivan plant in Canada, in a bid to better align its production with global demand.
In June, Ford announced its plans to slash 12,000 jobs across European operations and shut down five of its plants by the end of 2020 in a bid to restructure its sluggish European operations. This announcement came just after a month the #2 U.S. carmaker declared plans to slash 7,000 white-collar jobs, constituting 10% of its global workforce, as part of a companywide redesign. The cost cutting effort would save the company around $600 million a year.
Apart from the EV pioneer Tesla and Detroit 3 automakers, major German carmakers are also resorting to massive job cuts amid electric overhaul to keep costs in check.
In September, BMW AG stated plansto lay off around 6,000 employees in Germany by 2022 as part of its ongoing cost-savings effort.
In November, Daimler announced that it would axe at least 10,000 jobs as it seeks to fund the switch to EVs. The firm intends to cut staff costs by around $1.54 billion by 2022 and reduce the number of management positions worldwide by 10%.
In March, Volkswagen announced plans to cut 5000-7000 jobs by 2023 in new savings drive amid digital overhaul. The move will help the company lower costs by $6.6 billion. In November, the firm’s premium unit Audi declared its intent to trim 9,500 jobs by 2025, freeing up $6.61 billion to finance its shift toward green vehicles.
Japanese auto biggies are also joining the massive retrenchment move.
In February, Honda, as part of its global manufacturing restructuring, confirmed its plans to shut down its Swindon car plant in the United Kingdom by 2021, risking the loss of 3,500 job cuts.
In July, Nissan Motor announced its plans to axe nearly one tenth of its workforce to rein in costs. The firm intends to reduce at least 12,500 positions globally by 2023, marking its deepest downsizing since 2009.
Last Words
Indeed, automakers are set for the biggest job cull since 2008 as around 80,000 jobs are set to be lost over the next few years, per Bloomberg. From a future competitive standpoint, carmakers will have to balance revenue generation with broader challenges and escalating expenses. Eventually, the sector’s success will depend on how well the players manage costs incurred for mass manufacturing and evolving technology.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
Start Your Access to the New Zacks Top 10 Stocks >>