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Auto industry unlikely to return to normal anytime soon as COVID-19 lingers

Auto industry unlikely to return to normal anytime soon as COVID-19 lingers


Auto industry unlikely to return to normal anytime soon as COVID-19 lingers

Jamie L. LaReau

| Detroit Free Press
The NHL steps in to help GM make protective masks for health care workersGM hit a snag in its production of medical face masks when it came to sanitizing them. That’s when the Red Wings and two other NHL teams stepped in.General MotorsThe auto industry won’t soon forget 2020, but it can’t embrace a 2021 recovery yet.Last year’s turbulence casts a long shadow over this year, assuring us that it’ll be a while before we shake the horror — and the heroics — of last year and return to any sense of normal.And “normal” will likely be redefined.Consider the unprecedented moves brought on last year by the global coronavirus pandemic: The proliferation of online retail car sales and home deliveries as dealerships went on lockdown; cancellations of nearly all auto shows; idling car factories across North America for two months; engineers to executives working remotely and General Motors and Ford Motor Co. learning overnight to make lifesaving ventilators, face masks and shields. COVID-19 even changed the way people used their cars, with many seeing it as a makeshift office or private place to escape.US Capitol aftermath: Rioters are being identified and fired from jobsStimulus checks: TurboTax begins depositing payments after IRS errorOh, and Ford got a new CEO, Jim Farley, and it saw management shake-ups in the process as the automaker works to boost its balance sheet.Amid all that, the carmakers pushed forward plans to bring more electric cars to market and formed alliances to fund it. This year promises to be a turning point of sorts for EVs with several slated to launch.Fortunately, auto sales rebounded in the second half, delivering profits in the third quarter and robust fourth-quarter sales for GM, though its crosstown rivals Ford and Fiat-Chrysler Automobiles did not do so well.There is a vaccine ready for the masses, but there is also a new “super COVID” strain hitting us, unemployment remains almost 4% higher than it was this time a year ago and economic uncertainty looms. This year largely depends on what happens with the pandemic that caused last year’s upheaval. “What we know of 2020, that was so unforgettable about it, started in mid-March — and the trauma that came out of COVID-19 is by no means over,” said Harley Shaiken, a business professor who specializes in labor at the University of California, Berkeley. “We have the light at the end of the tunnel, but it’s very unclear as to how long it’ll be until we reach that light.”Rethinking auto showsLet’s recap some of the high (and low) points of 2020: The outbreak of COVID-19, first in China and later around the world, dominated auto industry news for the first half of the year. There was other news unrelated to the pandemic such as automakers unveiling a wave of plans to bring all-electric cars to market in the next few years, the launch of driverless vehicle test programs and President Donald Trump’s effort to roll back fuel economy standards.But one of the first big auto industry news stories connected to COVID-19 was the beginning of a string of auto show cancellations around the globe such as the Geneva International Motor Show and the New York auto show. In late March, organizers of the 2020 North American International Auto Show in Detroit pushed it forward from June 2020 to an eventual plan for September 2021.The last auto show the Motor City hosted was in January 2019. Some question whether the shows will return in the same way they once were. Shaiken suggests there may be fewer of them and they will be smaller in scale.Even Chevrolet has created its own virtual auto show on to allow consumers to walk a virtual showroom floor and interact live with a product specialist, which they couldn’t do in real life at the auto show this year. Chevy remains committed to auto shows in the future, but with caveats.”We are ready to participate in auto shows in 2021 consistent with previous years, however, a number of factors will help determine our final decision and level of participation — COVID protocols, implications of new show timing, dealer engagement and more,” said Megan Soule, Chevrolet spokeswoman. “As our plans become final, we will communicate accordingly.”There is a “question mark” over the future of auto shows for many brands, said Marick Masters, a business professor at Wayne State University. “These auto shows are very expensive for the companies so you have to think what kind of return do you get?” Masters said. “It’s a good event, but does it really add value to the industry? That’s hard to say.”Others argue the auto shows will never go away because they offer an emotional experience that no online reveal or digital shopping spree can replace.“There’s an emotional charge connected to the auto show reveal,” said Jessica Caldwell, executive director of insights at “Without the show, you can’t form that connection, especially for vehicles that are more toned down.”More: Detroit auto show canceled: Here’s what we could have seen and doneMore: Chevrolet’s new virtual auto shows and more EVs headed to the lineupProduction halt and heroicsMeanwhile, in mid-March last year, automakers closed their office buildings, telling employees to work remotely. Thanks to technology, the car companies were able to continue with business even when no one was coming into the office.By month’s end, the car companies agreed to shutter U.S. factories, too, after meeting with the UAW, which pressed for hourly worker safety. The plants would stay closed for eight weeks.Here, the union played a vital role, Shaiken said, adding, UAW President “Rory Gamble put out the message, in the simplest of terms, that we have to act as if our sons and daughters were on the assembly line. It made a difference and likely saved lives.”The shutdown was unprecedented, but when automakers did restart the plants in late May they were met with low demand for fleet vehicles. It was a blessing in disguise because the carmakers would have had a severe inventory shortage if both retail and fleet had recovered at the same time, said Edmund’s Caldwell.  Demand by fleet companies, such as rental cars or construction companies, remains depressed, but is slowly recovering.A few plants stayed open during that two-month period, allowing GM and Ford to convert them to make masks, ventilators and other medical supplies as the U.S. faced a shortage of such goods.It was dubbed the 21st century Arsenal of Health, a reference to World War II’s Arsenal of Democracy, the slogan used to refer to a collective effort by American industry to build heavy weapons and armor to support Allied troops.  “We saw some pretty remarkable things with the auto industry renewing the spirit of democracy where they are making ventilators and face masks and shields literally overnight,” Shaiken said. “The way GM and Ford stepped up to that plate was truly heroic. It showed the value of the industry and the value of the workers.”More: GM and Ford end critical care ventilator productionMore: Bill Ford: ‘We needed to go like hell to help those in need’ and no stopping nowThe ‘haves’ and ‘have nots’Many car dealers were ordered to close for a period, too, in many states last spring. But they showed their flexibility by adopting online sales and home deliveries, pulling the digital car buying experience ahead by years and likely making it permanent.”They had to find ways to sell cars and they really embraced online services and pickup and delivery, which is what consumers have been clamoring for for years,” said Michelle Krebs, executive analyst for Cox Automotive. “We’ve done some survey work that showed that consumers really liked it and all the things dealers were scared of, like lower profits, didn’t happen. Dealers made a lot of money last year.”In fact, the average new vehicle price is close to $40,000, Krebs said. The average used car listing is around $23,000, “which is remarkable and we don’t see that changing any time soon,” she said.In some ways, 2020 brought the bifurcated consumer car market to the surface. Dealers saw very expensive SUVs and pickups selling like hot cakes while sales of lower-priced vehicles were stagnant.”People with money continued to buy and those who lost their jobs or had trouble with credit can’t buy anything and that will likely continue,” Krebs said. “The pandemic worsened the divide between the haves and have nots. That’s why sedan sales are down because they are bought more by people on budgets. They were pushed out of the market or to the used market, which is booming.” Still, the online sales likely helped salvage what could have been a more dismal sales year. Krebs said the industry sold about 14.5 million new vehicles in 2020, down from 17 million in 2019. Cox does not include heavy duty or medium duty trucks in its data.Cox has increased its 2021 forecast to 15.7 million vehicles expected to be sold, based on the strength of year-end sales and other good news such as a second stimulus package has passed, elections are over, there is a strong stock market and a rollout of vaccines, Krebs said. Resurrect the deadThe in-demand vehicles this year were pickups and SUVs, which Jensen and other dealers complained they could not get enough of even when the industry was back at full production with worker safety protocols in place across factories.That much hasn’t changed. Automakers continue to struggle to catch up to demand, a feat that will likely take until the second half of this year.”We expect there will still be some inventory shortage this year due to catching up and filling the pipeline,” Krebs said.But the pandemic did resurrect the dead in Canada last year. GM needed to build more full-size pickups pronto. Enter the defunct Oshawa Assembly in Ontario and Unifor, the union for Canada’s autoworkers.During its contract talks, Unifor President Jerry Dias got GM to agree to do the unthinkable and reallocate product to the plant. GM starts building pickups at Oshawa next year. More: Here’s how Canada’s autoworker union won big with GM, Ford and FCA”That plant was dead and gone and now it’s back. That’s a major achievement for Unifor, General Motors and Canada,” Shaiken said. “We saw some of that with the UAW in late 2019, the fact that real money is going into Detroit Hamtramck — that’s a real boon for the industry too.”More: Here’s how Canada’s autoworker union won big with GM, Ford and FCAUAW can rebuildMore: Autoworker shares how Biden announcement launched him to celebrity status’If you build it, they will come’The pandemic has helped prepare the world for electric vehicles to take off in “a big way with a lot of new products here in North America and more so globally,” said Sam Abuelsamid, principal analyst of E-Mobility at Guidehouse Insights in Detroit. Last year, several automakers announced EV plans and various alliances. For example, in November, GM said it was increasing the number of EVs it will bring to market thanks to advancements in technology this year. GM will now bring 30 EVs to market by 2025. GM had previously said it would bring 20 EVs to market by 2023.GM announced in September it would partner with Honda to share vehicle platforms and technology in North America starting this year. Earlier, in April, GM and Honda announced an agreement to jointly develop two all-new electric vehicles for Honda. Those vehicles will be on GM’s global EV platform powered by proprietary Ultium batteries. Honda will design the vehicle exteriors and interiors. GM announced in July it was partnering with EVgo, a fast-charging network for electric vehicles, to triple the size of the country’s public fast-charging network.Then there was GM’s near-partnership with startup electric truck maker Nikola. In November, after controversies plagued Nikola and its leadership, GM ditched its original plans laid out two months earlier that would have given it an 11% equity stake in the company, opting instead for a standard supplier arrangement in which GM sells Nikola its fuel-cell technology.So last year was the talk of EVs, and this year is the reality, Krebs said.”I always think of the movie Field of Dreams and the line, ‘If you build it, they will come.’ The automakers are building them in big numbers this year and in all sorts, SUVs included,” Krebs said. “This will be a big test to see where EVs go and the Biden administration is a lot friendlier to EVs.”Electric expectations in 2021The Hummer EV pickup will come to market in the fourth quarter. The Cadillac Lyriq SUV will arrive early next year. Ford started production of its Mustang Mach-E electric SUV in October and that will get to customers in the coming days and weeks. “VW is starting to kick off a wave of EVs too and that will expand into North America and China this year. Globally, they said they will have 75 EVs by 2025,” Abuelsamid said. “I suspect we’ll see one or two other product announcements later this year.”Tesla continues to grow with plans to open two new plants this year, one in Germany and one in Texas, Abuelsamid said. Due out also this year are the Volkswagen ID.4 compact SUV and the Tesla Cybertruck pickup, as well as lesser known EVs such as Lordstown Motors’ 2021 Endurance pickup.”There are a bunch of EV startups,” Abuelsamid said. “Rivian will be really important to watch. They are very well funded and will start production this spring at their plant in Illinois. They’ve raised over $5 billion before they even started production.”FCA will launch a Jeep Wrangler plug-in hybrid and plug-in versions of the new Grand Cherokee and the Grand Wagoneer SUVs.”A lot of new plug-in vehicles across the board from almost every brand, and the big thing is we’re going to start seeing a lot of EVs in new market segments where we haven’t seen them before and at lower prices,” Abuelsamid said. Abuelsamid said he expects GM to offer an electric version of its popular Silverado and Sierra pickups. Ford has announced an all-electric F-150 pickup and Transit van for North America. “As manufacturers start to roll out more EV models, they want to sell as much as they can to drive down their costs, so during the pandemic they kept their foot on the gas in terms of electrification and kept those programs moving ahead,” Abuelsamid said. More: ‘Handful’ of Michigan Cadillac dealers take a buyout rather than sell EVsBut one idea that went bust in 2020 was autonomous vehicle ride-sharing programs. Either because of lockdowns or people’s fears of getting into vehicles where they could be exposed to the coronavirus, there was a huge drop-off in the use of mass transit as commuters shifted back to personal vehicles, helping buoy U.S. car sales.What’s aheadThe first big thing ahead this quarter is the birth of a new company called Stellantis, which will complete the merger of FCA and PSA Group.There is widespread expectation that the industry will see an accelerating wave of consolidation and cooperative efforts, especially new joint ventures, to help speed up and pay for the research and development of EVs and other technology.But there remain concerns about the pandemic and a possible need for lockdowns again, depending on the effectiveness of the vaccine and how many people get it. “The U.K. has a six-week shut in now and that’s a recipe for economic trouble,” Masters said. “If we don’t get a handle on it and can move back to a more normal way of life, we’re not going to be able to climb back out of this pandemic.”Auto sales will be affected by the incoming Biden administration too, Shaiken said.”He’s put together a competent cabinet, you could argue against a couple of them, but overall they are very competent,” Shaiken said. “He’s talked about putting more money into the economy and that’s an investment in jobs.”What’s tragic is that 360,000 people are dead so far from COVID-19 and there could be many more dead before we’re done with it, Shaiken noted. “But if we have this conversation again at the beginning of 2022, we’d like to say we just went through the year of recovery,” he said.Contact Jamie L. LaReau: 313-222-2149 or Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

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