Finishing Line

Good - Bad News

By Stefan Budricks

12/01/18

Developments in the auto manufacturing industry will impact the nature of the vehicles car wash operators can expect to frequent their facilities in the not too distant future. A recent announcement from General Motors was a reminder of an industry in flux.

The timing of the statement could not have been more unfortunate: right after Thanksgiving, right before Christmas. General Motors’ plans to lay off some 14,000 workers in North America, including salaried staff and executives, struck a sour note at what should otherwise be the start of a festive season. This is not the Christmas message workers in the auto industry were looking to receive.

Allocation of production to three assembly plants — two in the United States and one in Canada — will cease after December 2019. The same applies to two engine plants in the United States. Two yet-to-be-named plants outside North America will also close by the end of next year. During the course of 2019, the company will discontinue production of models that are selling poorly, including the Chevrolet Impala, Cruz, and Volt; the Cadillac CT6; and the Buick LaCrosse.

This is, of course, terrible news for the individuals whose livelihood will be placed in jeopardy and for the communities that will be deprived of well paying jobs. In support, politicians of every persuasion have been quick to express their displeasure, as have the labor unions.

The condemnation has not been universal, though. Investors received GM’s announcement positively, bidding up the company’s stock on news of the plans. It’s not difficult to figure out why. First, GM’s decision to discontinue a whole range of slow-selling sedan models echoes Ford’s read of the market reflected in that company’s earlier announced plans to curtail its own sedan production by 2022. The automakers are simply following consumer demands: a distinct preference for trucks, crossovers, and SUVs. Making cars people don’t want is a guaranteed losing proposition.

The second reason GM offers for these changes is the need to focus its resources on autonomous and electric vehicles. The company framed this restructuring in terms of staying in front of changing market conditions and customer preferences to position it for long-term success. That this adjustment in focus is necessary is evident from an alarm sounded by Mark Rosenker, the former chairman of the National Transportation Safety Board.

Writing at thehill.com last July, Rosenker warns that the UK, Germany, South Korea, and Singapore are all on track to surpass the United States in the autonomous vehicle race. There is a real risk, he writes, that China, well positioned to overtake everyone, “will lead the driverless car revolution — and we’ll be left following.”

With regard to electric vehicles, China already has the highest number of electric cars on the road. In the United States, electric cars make up less than 1 percent of vehicle sales. That is expected to change at an ever-accelerating pace. LMC Automotive, an industry research firm, predicts that 75 models will be manufactured in the United States over the next five years, but that sales will not crack the 15 percent of new-car-sales mark even by 2025. Bloomberg’s 2017 Electric Vehicle Outlook, however, foresees electric car sales capturing over 50 percent of light-duty vehicle sales 10 years later.

These are the coming markets that GM is eyeing — with strong medicine taken today to bring about healthy growth tomorrow.



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