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Auto Time Bomb: Slowdown Coming Up, Manufacturing Has Peaked This Cycle

The Brookings Institute says Auto slowdown Flashes Caution Lights for Manufacturing Employment and Trump.

A switch to self-driving, trends towards electric, and a glut of used cars are all in the spotlight.

After seven years of strong growth following the 2008 economic crisis and federal bailouts of both General Motors (GM) and Chrysler (FCAU), auto sector output and employment growth have slowed markedly from record levels. Years of catch-up purchases by car buyers have finally plateaued. Likewise, automakers must economize to invest billions in developing the electric and self-driving cars of tomorrow.

And so the layoffs have begun. Last fall, Ford jolted the industry by revealing that its sales had peaked, while projecting a tough 2017. Then came the company’s April disclosure that it will need to slash $3 billion in costs to free up capital to invest in new technology. Soon after that came Ford’s announcement of as many as 20,000 layoffs worldwide, as well as word that GM had cut production at four U.S. assembly lines and would be laying off about 4,400 factory workers. Fiat Chrysler also laid off 1,300 workers at a Detroit assembly line.

By themselves, these announcements are not apocalyptic like the dire layoffs of 2008. Rather, the recent cuts mostly reflect the fundamentally cyclical nature of a huge consumer business. And yet, the present and future auto slow-down is a big deal because auto is critical to the manufacturing sector, which in turn looms large in regional and political narratives about whether the country is moving “in the right direction.”

Auto-related industries, after all, delivered about 40 percent of the nation’s manufacturing employment gains in the last two years, especially important given the slow growth of other production sectors in the face of a...


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