Declining Detroit Three competitiveness, not free trade, to blame for plant closings, job losses

Yahoo

18-04-2025

WILMINGTON, CALIFORNIA - APRIL 03: New Nissan cars are driven onto a rail car to be transported from an automobile processing terminal located at the Port of Los Angeles on April 3, 2024 in Wilmington, California. The Japanese automotive maker is being impacted by President Trump's new 25 percent imported automobile tariffs. (Photo by)
I'm old enough to remember when hundreds of thousands of Buicks, Mercurys, Oldsmobiles, Plymouths and Pontiacs rolled off the assembly lines every year in Flint, Dearborn, Lansing, Detroit and Pontiac, the respective hometowns of these storied brands.
The problem is that too many other people, including influential policymakers, also wistfully recall those days and somehow believe they can be resurrected.
Mercury, Oldsmobile, Plymouth and Pontiac ignobly landed in the junkyard of automotive history decades ago.
There hasn't been a Buick built in Flint, the brand's former hometown and birthplace of General Motors, since 1999. Buick still exists but sells only a small fraction of the approximate 800,000 U.S.-produced vehicles it shipped to dealers annually in the late 1970s and early 1980s.
President Donald Trump says he's determined to restore U.S. auto manufacturing through stiff tariffs that will force domestic and foreign automakers to build all the cars and trucks they sell to American consumers here.
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While he has repeatedly flip-flopped on tariffs for other goods, such as smart phones, Trump is holding steady (at least as I'm writing this sentence) on 25% tariffs for foreign-built autos and parts. Those include many vehicles built outside the U.S. by Detroit automakers.
(Whoops. The president said he's considering pausing tariffs to give the industry more time to build plants in the U.S.)
'Foreign automobile industries, bolstered by unfair subsidies and aggressive industrial policies, have expanded, while U.S. production has stagnated,' Trump said on March 26 in announcing his own aggressive industrial policy.
Trump sees a hermetically sealed U.S. auto industry as the centerpiece of his plan to create a 'golden age of America.' And his hyper-loyal lieutenants charged with implementing the tariffs couldn't be more delusional in their support.
'(W)e want the tires made in Akron. We want the transmissions made in Indianapolis. We want the engines made in Flint and Saginaw. And we want the cars manufactured here,' said Trump trade advisor Peter Navarro.
Trump puts the blame on the decline of the U.S. auto industry squarely on free trade. Trade deficits with other countries have led to 'the hollowing out of our manufacturing base,' distorted supply chains and threatened national security, he said.
His common refrain is countries that run a trade surplus with the U.S. are 'ripping us off.'
(Side note: popular Chinese-built Buicks saved the brand from extinction, although Buick and other non-Chinese automakers are struggling there as of late.)
Some economists agree that globalism has destroyed millions of blue-collar factory jobs in the U.S.
Prominent among them is Susan Houseman, director of research at the Upjohn Institute for Employment Research in Kalamazoo. Houseman has been widely noted for her eye-opening finding that liberalized trade with China in 2001 was the root cause of the staggering loss of U.S. manufacturing jobs.
Other economists insist the decline in manufacturing employment has been a result of increased productivity made possible by the proliferation of factory robots.
'What you see is that the real story in the auto sector is automation,' Jason Miller, a Michigan State University business professor, told CNN Business.
Surprisingly, there are more automotive assembly jobs in the U.S. then there were in 1994, the year the much-maligned North American Free Trade Act took effect, according to Labor Department data cited by CNN. (There are about 183,000 fewer auto parts jobs than at the start of NAFTA.)
It's a different story in Michigan because of something we don't like to talk much about—the precipitous competitiveness decline of the Detroit Three automakers.
Except for monster pickup trucks and gargantuan SUVs, American consumers generally prefer Asian and European brands not built in Michigan. That's tough to say for someone like me, who grew up in a mostly GM family.
Ford, GM and Stellantis (formerly Chrysler) sold just 5.4 million cars and light trucks in the U.S. last year, down nearly 60% from the more than 12 million cars they sold in 1999, according to a University of Michigan economic forecast.
Overall, 15.8 million cars and trucks were sold last year in the U.S., dominated by foreign brands.
Forecasting sales this year is a nightmare because of Trump's 25%, confusing tariffs on foreign-built cars and parts. But higher prices resulting from the tariffs could cuts sales by 700,000 vehicles this year, according to auto analytics firm Cox Automotive.
In February, before the auto tariffs were enacted, U-M economists predicted the Detroit Three's U.S. market share would fall to a record-low 32.7% by 2026 following decades of declining sales.
Less market share means less need for assembly plants, parts and workers. It shouldn't be surprising then that auto manufacturing employment in Michigan has plunged from its most recent high of 91,000 in 2000 to about 49,000 in February.
They key to reversing that trend is for the Detroit Three to build more vehicles that appeal to American buyers lost to Honda, Hyundai and Toyota. Tariffs won't save them.