In the last few days, Volkswagen’s Audi division management said it will cut as many as 9,500 people. BMW management has stated it will cut many people as well. Today, Mercedes parent Daimler’s management said it will let thousands go. Some analysts believe the global car business is at the start of a recession. If so, General Motors and Ford will face similar needs to chop costs.

The U.S. is the only large car market which has had relatively even sales in the last year. The annual rate of light truck and car sales has stayed at about 17 million for each of the last four years, which is an unprecedented run. Europe’s car sales, and those in the UK have dropped. Sales in the world’s largest car market–China– have taken a dive this year, a reversal of years of growth. GM and Ford have both suffered double-digit sales fall offs in 2019. Without China success. both face extreme challenges

Ford management has already said it will have a multibillion dollar restructuring, with its is a pivot to electric and autonomous cars, which will cause job cuts, and some have already begun. GM has started to cut staff, but so far at a modest rate.

Ford and GM are far from the only companies which want their fleets to be mostly made up of electric and self driving cars in the next few years. However, there is no evidence the car buying public is prepared to move quickly away from gas driven cars and hybrids. Ford, GM and other car companies could be caught flat-footed, if the customer base for these in not there.

The transformation of these car companies will likely run head long into a period when global car sales are weak. Two blows to the manufacturers will be impossible to take at their current level of production. Something will need to give.

The German car company layoffs are the tip of an iceberg. The U.S. manufacturers are about show how hard the trouble has become.

 

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