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Automakers Cut 38,000 Jobs in the Last Six Months and More Are on the Way: Report

David Tracy May 23, 2019. 24 comments
The Morning ShiftAll your daily car news in one convenient place. Isn't your time more important?   

Things start getting depressing when you count up automakers’ recent job cuts, Dr. Z retires but not before telling Daimler to cut costs, Bosch gets fined for role in Dieselgate, Tesla has doubters on Wall Street and more for The Morning Shift of Thursday, May 23, 2019.

1st Gear: 38,000 Job Cuts and More to Come

We keep hearing that auto industry sales have plateaued , and that there may be tough times ahead. And if you look at recent “restructuring” announcements from major automakers, that seems obvious. We’ve seen plant closures from a number of automakers, and job cuts. Lots of job cuts.

According to Bloomberg’s count, there have been 38,000 cuts announced in the past six months alone, and more may be on the way. Of course, not all of those are in the U.S., as the once-seemingly endless fountain of cash that was the Chinese car market has slowed down , yielding job reductions there as well.

Check out Bloomberg for the full table tallying up all the cuts, but some of the major ones include the 7,000 white-collar layoffs that Ford announced this week, GM’s announcement in November that it planned around 14,000 blue and white-collar layoffs, Tesla’s January announcement that it would cut ~3,000 jobs , a possible 10,000 cuts by Daimler—and the list goes on.

Layoffs are getting out of hand and, according to a Bank of America Merrill Lynch analyst, things could get worse, with Bloomberg quoting the analyst as saying:

“The industry is right now staring down the barrel of what we think is going to be a significant downturn,” Bank of America Merrill Lynch analyst John Murphy said at a forum in Detroit on Tuesday, adding that the pace of decline in China “is a real surprise.”

The story mentions a number of factors contributing to the cuts in addition to slowing sales in the U.S. and China; things like heavy investments required for electric and self-driving car development, and even tariffs.

We read earlier this week on Bloomberg that a Wall Street analyst thinks Ford needs to cut another 23,000 workers to make up for China’s slowing auto market, and in this more recent story, the news site says these 38,000 cuts in the past six months “may be just a beginning.” Oh boy.

2nd Gear: Before Leaving Daimler, Dr. Z Warns of Need for Cost Cuts

Furthering the aforementioned prediction of even more impending job cuts, Daimler CEO Dieter Zetsche—known as “Dr. Z”—had some gloomy things to say on his very last day in office. From Reuters:

“Everything is under scrutiny: fixed and variable costs, material and personnel costs, investment projects, vertical integration and the product range,” Zetsche told the company’s annual general meeting in Berlin, where he was applauded by around 5,000 shareholders.

“Along with external factors, we are now also feeling the financial effects of the company’s transformation,” Zetsche said.

This “transformation” is a reference to an increased focus on electrification, with Reuters writing:

To ensure that customers buy zero-emission cars, the Stuttgart-based group said it was aiming to limit the price of new car technologies for customers.

“To do so, we have to cut costs and increase efficiency throughout the company,” Zetsche said, as he confirmed the carmaker’s full-year targets.

“This was expected, but it doesn’t make it any better. In particular, we cannot and will not be satisfied with the current level of profitability.”

Slowing car sales plus increased investment in electrification and autonomy equals cost cutting. And cost-cutting sometimes means job cutting.

3rd Gear: Bosch Fined $100 Million Over Role in Emissions Scandal

Bosch has been a player in a number of diesel emissions scandals, including the FCA EcoDiesel issue and Dieselgate. It was Bosch’s engine management software that VW used on vehicles that altered emissions to be cleaner while under testing, and dirtier in the real world, and now Bosch has to pay for this connection.

German prosecutors in Stuttgart denounced the tier one-supplier’s “lapses in supervisory duties,” as Reuters puts it, and slapped a 90 million Euro fine (roughly $101 million) on the supplier. From the story:

Prosecutors imposed a 2 million euros fine for a “regulatory offense” and a further 88 million euros to penalize “economic benefits,” Bosch said in a statement on Thursday.

Bosch said, “With the issue of the notice of fine, the investigations conducted by the Public Prosecutor’s Office of Stuttgart against Bosch as a supplier of engine control units for diesel engines has been completed.”

Bosch, it’s worth noting, has agreed to pay VW TDI and FCA EcoDiesel owners in the U.S. cash as parts of the class action settlements. And with this Stuttgart ruling, I bet the supplier is hoping to put this behind it once and for all.

4th Gear: Organizations Voice Their Concerns Over GM’s Proposed Self-Driving Car Fleet

GM wants to unleash up to 2,500 modified Chevy Bolts onto public roads (possibly in San Francisco) as a part of a “controlled” driverless ride-sharing test fleet, Reuters reports. As part of that plan, the company petitioned the National Highway Traffic Safety Administration for a “two-year temporary waiver” on certain features like mirrors, turn signals, and dashboard lights—things that a human would need, but a robot might not.

GM made the waiver request in January of last year, and in March, the news site reports, it became available for public comment for 60 days—a period that ended on Monday. Reuters read through some of the comments, and highlighted some disapproving voices, writing:

Several groups, including car dealers and insurers, raised questions posted publicly this week pressing NHTSA to demand more data, require additional safety provisions or deny the petition outright.

The National Association of Mutual Insurance Companies said driverless vehicles without human controls should not be permitted on public roads until data proves the cars are safe.

“NHTSA has no business enabling (automated vehicles) to operate on the roads, and surely has no business removing federally mandated vehicle safety standards to a vehicle that they do not know if it’s as safe as existing vehicles,” said the group, which represents 43 percent of U.S. auto insurers.

It continued by mentioning that the Union of Concerned Scientists actually recommended that the petition be rejected, and said that GM’s self-driving vehicles have been involved in several collisions, even with backup drivers inside.

A nonprofit organization called The American Association of Motor Vehicle Administrators suggested that the cars be outfitted with some indicator to passengers and others on the road that “the vehicles do not comply with federal safety standards.”

It’s not surprising that folks are concerned about safety features on self driving cars, and these are just issues that will need to be worked through as the technology enters deeper stages of development.

5th Gear: Wall Street Analyst Voices Concerns About Tesla

We heard from Reuters last week that Tesla’s boss Elon Musk called for financial micromanagement of all expenses, or else the automaker might go broke.

Things have been pretty dire at Tesla for quite some time , and on Wednesday in a call with investors, a Morgan Stanley Analyst seems to have lost all faith. Per Bloomberg:

“Tesla was seen as a growth story,” Morgan Stanley analyst Adam Jonas said on the call, a recording of which was obtained by Bloomberg News. “Today, supply exceeds demand, they are burning cash, nobody cares about the Model Y, they raise capital and there’s no strategic buy-in. Today, Tesla is not really seen as a growth story. It’s seen more as a distressed credit and restructuring story.”

Per the story, Jonas thinks Tesla might have “‘over-saturated’ the market for battery-electric sedans outside of China.” I’m not sure about that last bit, but I do know that things could be better at Tesla.

Reverse: The First Cross-Country Road Trip Begins

Neutral: Are You Worried About the Auto Industry?

Look at those five gears—none of them are positive. They paint a picture of doom and gloom. Are you worried?

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