Shifting demand from cars to trucks and SUVs is forcing General Motors Co. to lay off more than 2,000 workers indefinitely at two assembly plants in Ohio and Michigan starting in January.
The company said Wednesday it will suspend the third shifts at factories in Lordstown, Ohio, and in Lansing, Michigan, because of the market change, which is growing and shows no sign of abating.
General Motors also announced that it would invest more than $900 million at a Toledo, Ohio, transmission plant, the Lansing Grand River factory and a casting plant in Bedford to prepare for undisclosed new vehicles. The investment will preserve jobs but not create new ones. The Bedford Powertrain plant, located about 75 miles south of Indianapolis, has about 870 employees.
About 1,250 workers will be furloughed at the Lordstown plant, which makes the Chevrolet Cruze compact car, starting Jan. 23. Another 840 will be idled at the Lansing Grand River factory, which makes the Chevrolet Camaro muscle car and the Cadillac ATS and CTS luxury cars, when their shifts end Jan. 16.
"It's supply and demand, and right now the demand is not there for what we have," said Glenn Johnson, president of a United Auto Workers union local at the Lordstown plant east of Cleveland.
Last month, 61.6 percent of U.S. new vehicle sales were trucks and SUVs, according to Autodata Corp. That's a record that is likely to be broken said Jeff Schuster, senior vice president for forecasting at the consulting firm LMC Automotive.
Because of the shift, it's likely the GM layoffs won't be the last at auto factories that build only cars in the slowing compact, subcompact and midsize segments, Schuster said. "It's not inevitable but the likelihood is certainly higher," he said.
Americans have been moving away from cars toward trucks and SUVs for several years now as gas prices have dropped to near $2 per gallon and the larger vehicles have become more efficient. Baby boomers and young people are attracted to smaller SUVs because of their cargo-carrying ability, high seating position and visibility.
Sales of the Ohio-manufactured Cruze are down nearly 20 percent this year even though a new version is only in its second year of production. Of the vehicles made in Lansing, ATS and CTS sales each are down about 17 percent this year, while Camaro sales are off 9 percent.
GM doesn't know when the workers will be called back, said spokesman Tom Wickham. "Looking ahead at 2017 we know that the car market continues to soften and the crossover (SUV) and full-size truck market continues to grow," he said. Laid-off workers will get supplemental pay and state unemployment benefits that will amount to most of their wages for a year.
The GM layoffs are not the first this year for the U.S. auto industry, which has experienced healthy year-over-year growth since 2009. But sales are starting to slow from the record of 17.5 million set last year.
Last month, GM's crosstown rival Ford Motor Co. said it would temporarily idle four North American assembly plants to better align production with demand. Ford has scheduled one-week closures for plants in Kansas City, Missouri, and Hermosillo and Cuatitlan, Mexico. Those plants make the F-150 pickup truck, the Fusion sedan and the Fiesta subcompact. It also scheduled two weeks of down time for its Louisville, Kentucky, plant, which makes small SUVs.
Lordstown's Johnson says the layoffs aren't the fault of the Cruze, which can get 40 miles per gallon on the highway and recently was named the most reliable compact car by Consumer Reports magazine.
"This isn't just a GM issue," he said. "The whole small car industry is suffering with the shift."