Automotive Industry Accelerates Mass Layoffs Amid Declining North American Demand

Toyota Extends Shutdown Period at US and Canadian Plants

Temporary Layoff of Approximately 5,000 Employees

Nissan Lays Off Around 20,000 Worldwide

US Employment Indicators Expected to Hit Worst Levels

[Asia Economy Reporter Kwon Jaehee] Japanese automaker Toyota Motor Corporation has decided to extend the shutdown period of its US automobile plants. This measure comes amid a sharp decline in automobile demand linked to the economic recession, with some forecasts suggesting the impact could be greater than during the 2008 Lehman Brothers crisis. The number of US unemployment benefit claims, which has already reached 10 million in just two weeks due to mass layoffs, is expected to increase further.

According to Bloomberg on the 8th (local time), Toyota has decided to extend the suspension of operations at its North American plants, including those in Kentucky, USA, as well as in Canada and Mexico, resulting in the temporary layoff of about 5,000 employees. The reopening of plants is difficult due to the COVID-19 pandemic, and sales have plummeted due to decreased demand. Toyota's sales in the US market last month were 135,730 units, a 37% drop. This is considered the worst since the Great East Japan Earthquake in 2011.

This phenomenon is not limited to Toyota. Honda and Renault-Nissan have already notified all employees at their US plants of temporary layoffs. Nissan alone has temporarily laid off about 10,000 employees in the US, with an additional 6,000 in the UK and 3,000 in Spain, totaling around 20,000 temporary layoffs worldwide. Honda is also implementing paid leave for about 10,000 workers, representing half of its workforce at five US vehicle assembly plants, until the end of next month.

US electric vehicle manufacturer Tesla has placed a significant number of employees on unpaid leave, while the remaining employees will face salary cuts ranging from 10% to 30% by rank from the 13th of this month until the end of the second quarter.

Plant shutdowns and workforce layoffs are likely to create a vicious cycle for the economy. According to UK research firm IHS Markit, global automobile sales are expected to decline by 12% this year compared to last year. Reduced demand makes it difficult to operate plants, which leads to reduced employment and further demand decline. The impact is even greater compared to the 3% drop in automobile demand following the global financial crisis in 2009. In Germany, new car registrations have already dropped by 38% compared to last year, and in the UK, by 44%.

The mass layoffs sweeping the automobile industry are expected to cause US employment indicators to hit their worst levels. According to CNBC, more than 5 million people applied for unemployment benefits in the US last week. The number of unemployment claims will be announced on the 9th. New unemployment claims were about 10 million in the third and fourth weeks of last month, and it is widely expected that the total will exceed 15 million over three weeks.

According to the US Department of Labor, the US unemployment rate surged from 3.5% in February to 4.4% in March, showing the worst employment indicators. The unemployment rate for April is expected to reach double digits. According to the Associated Press, the US had steadily increased jobs over the past decade, creating a total of 22.8 million jobs, but the COVID-19 crisis is rapidly undoing these achievements. It is widely expected that the number of unemployed in the US will exceed 35 million and the unemployment rate will soar to the 30% range. Janet Yellen, former Chair of the US Federal Reserve, recently stated in an interview with CNBC that "with the US economy contracting by 30%, the unemployment rate will reach 12-13%."

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