Expert predicts auto industry could take 2 years to rebound to pre-pandemic sales levels

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It’s going to take at least two years for auto manufacturers to restore the sales and production numbers seen before the start of the coronavirus pandemic, an industry expert told Michigan lawmakers in Lansing on Wednesday.

Despite successful efforts from suppliers and manufacturers to keep their doors open and employees safe, staffing shortages and some overall drop in demand means the industry needs to continue to adapt and work collaboratively, said Carla Bailo, president and CEO of the Ann Arbor-based Center for Automotive Research.

“Everyone is predicting this year about 13 million (vehicles sold), pre-covid we were about 17 million. We expect it’s going to take another two years, but that’s predicated on a good recovery and continued recovery throughout this year,” Bailo said during a legislative hearing.

“Should we have another hit in the fall, we’ll have to adjust those figures. So about two years to come back to where we were.”

Bailo joined Michigan manufacturers and industry authorities in briefing lawmakers on the pandemic’s impact on the automotive world. Every speaker agreed the auto industry’s ability to produce personal protective equipment helped save lives and jobs, but there are real and practical problems that operating during a pandemic will present for the foreseeable future.

The discussion comes as every industry tries to maintain a tenuous grasp on operating during a pandemic. Gov. Gretchen Whitmer is expected to soon allow movie theaters, gyms and similar businesses to start operating again on a limited basis. But she’s repeatedly warned that she may need to institute another shut down if coronavirus case rates spike again.

Automotive manufacturing shut down like every other industry in March, even as suppliers and large manufacturers looked for ways to produce vital health and safety equipment to fight COVID-19, the disease caused by the coronavirus.

Any new halt in production, even a short one, would be crippling, said Brian O’Connell, General Motors regional director of state government relations.

“The shutdown had a huge impact on our industry and our company. And we cannot afford a shutdown. We cannot afford a week shutdown,” O’Connell said.

Demand for new and used vehicles is down, but Bailo said not as much as some expected. Although overall vehicle sales were down 25%, sales of the Michigan mainstay pick-up trucks are down only 10%.

At the same time, there are 20,000 fewer jobs in the automotive industry compared to the second quarter of last year. Michigan’s jobs in the industry are down 18% — Bailo said that’s the lowest level since 2009, during the Great Recession.

“There was a lot of doomsday forecasts early on, but the automotive industry has stayed resilient and most of the plants have been able to stay open,” Bailo said.

Now, GM, Ford Motor Co. and Fiat Chrysler Automobiles say they continue to follow strict testing and quarantining protocols for employees who may be sick or who came in contact with someone who has COVID-19.

The UAW, which represents roughly 150,000 workers from the Detroit Three, repeatedly advocated for strict safety practices and heralded the manufacturer’s recent decision to continue testing employees even if they showed no symptoms of the virus.

Workers must be healthy and feel safe to keep production moving, noted John Walsh, president and CEO of the Michigan Manufacturers Association. Manufacturing in the state has rebounded some since the start of the pandemic, but as of July there are roughly 69,000 fewer Michiganders employed in manufacturing than the 628,000 who had a job in the industry in July.

While working from home or virtually may not substantially disrupt other industries, it’s essentially not an option for most manufacturers, Walsh said. Bailo and others agreed that finding and keeping an employee who can work on site while handling the daily rigors of life during a pandemic is difficult.

“This is going to continue to be an issue. It’s a strain on the manufacturing sustainability and keeping the production line running,” Bailo said.

“You don’t have the option to work remotely when you’re on the line. And if you’re a single parent trying to educate children, that’s a significant problem.”

Although state Rep. Vanessa Guerra, D-Saginaw, agreed GM and other companies may have strong safety plans, she questioned whether they’re always followed. Without providing specifics, she said she’s heard from constituents saying some employees are not informed when colleagues are sick and companies are not doing enough to adequately clean sites where infected people may have worked.

GM relies on the safety practices every day, requiring masks at all times while on site, O’Connell said. Echoing comments from other speakers, he said the company prioritizes employee health in a way that ensures operations can continue.

“We cannot have an outbreak at our plants. It shuts us down. It shuts our suppliers down. The impact is tremendous on us,” O’Connell said.

“We have not had a transmission at our plant where people are following safety protocols. Now, have we had employees who had it? Yes, but it was when they were home over the weekend and not working.”

Shape Corp. President and CEO Mark White said his company employees about 3,500 people worldwide, including approximately 1,000 on any given day in Grand Haven. The supplier, which designs and builds components that manage the forces that occur when a vehicle is in a crash, instituted temperature checks and socially distanced work sites for its facilities, White said.

The company’s policy resulted in 168 potential cases of the coronavirus among employees and 16 confirmed cases in Grand Haven, White said. Many were either prevented from entering a facility due to a potential fever or reported symptoms, or left work after reporting symptoms during a shift.

White said his company is working with its employees to provide flexibility for those who do have child care and other needs. He also said they provided across the board raises. But he said concerns about child care, catching the coronavirus and “the financial security of the enhanced unemployment benefits” is causing unprecedented absenteeism and turnover.

“Our government needs to develop incentives to work, not incentives to stay on unemployment,” White said.

“With respect, the incentives created to stay home go beyond physical well-being. They create a false sense of financial well-being, and keep people from coming to work at Shape and other good employers.”

Hundreds of thousands of Michigan residents have filed for unemployment since March. Federal legislation provided an additional $600 per week for unemployment benefits in the first months of the pandemic, but those benefits are no longer available. The state recently received federal approval to provide $300 in extra unemployment benefits, but this funding is not expected to last very long.

Lawmakers and industry leaders highlighted efforts by many companies to produce personal protective equipment. GM and Ford recently announced they provided the federal government with tens of thousands of ventilators, fulfilling the terms of their contracts to built the live-saving machines that were in short supply.

Ford delivered 50,000 ventilators in conjunction with a $336 million contract. The company also donated 1.5 million masks as part of a free mask initiative led by the governor.

GM plans to donate 2 million masks to Michigan public schools. That’s in addition to the 30,000 ventilators it built as part of a $489 million federal contract.

Moving forward, companies want to see lawmakers take action to provide some protection from lawsuits. This week, legislators took up bills that would make it harder to sue an employer or producer of protective equipment due to coronavirus concerns. The bills still require several votes before they could make it to the governor.

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