The auto industry has started to reopen in the United States. Many employees worry about safety plans in factories, which do not have a perfect safety record in other industries. The car manufacturers worry that what they build will not be bought.
Toyota Motor Corp. (NYSE: TM) suffered an 80% drop in profits last quarter. It expects sales to fall 20% this year. Reuters reports that Toyota will reduce U.S. factory output by 29% through October.
The U.S. carmakers believe that they need to begin to make cars again or wait on the sidelines while their cash balances are depleted. Whether they will put the health of factory workers in jeopardy is an open question. Certainly, the meat industry’s employees have suffered. Amazon.com Inc. (NASDAQ: AMZN) has had cases of COVID-19 in its distribution centers. Some of its workers in these facilities have protested. Despite that, the centers have not shut down.
Forecasts of what will happen to U.S. car sales vary widely. The industry research firm J.D. Power says sales could rebound in May, after a drop of 50% in some parts of the country last month. The rebound is based on at least two factors. The first is how much of the county will open up after weeks of lockdown due to the spread of COVID-19. The other is whether people will spend money when many want to save it. That savings surge is because so many people have lost their jobs, or worry they will.
One of the car industry’s greatest challenges is that the average number of years a car has been on the road in America is almost 12. Car quality is among the primary reasons for that. People can hold their cars another year or two if they run well now.
The worst case for the manufacturers is that they open and some workers get ill, coupled with a reluctant customer who will not return to showrooms this year.