Automakers Honda & Nissan to Furlough Nearly 30,000 U.S. Workers as New Car Sales Plummet

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【Summary】Automakers Honda and Nissan announced on Tuesday the furlough of thousands of workers in the U.S. as the coronavirus pandemic brings the U.S. economy to a virtual standstill. Honda already suspended it operations on March 23 and now the company says its U.S. plants will be closed until May 1. The furlough affects around 30,000 workers in total.

Eric Walz    May 14, 2020 11:00 AM PT
Automakers Honda & Nissan to Furlough Nearly 30,000 U.S. Workers as New Car Sales Plummet
A Honda Accord sedan on the assembly line at the company's Marysville, Ohio assembly plant.

With the U.S. in the midst of the coronavirus pandemic that appears will last through the entire month of April, auto production has ceased across the country. The mandatory shelter-in-place orders has also led to a significant drop in new cars sales. 

With demand for new cars falling off a cliff, global automakers are idling their U.S. factories and furloughing workers. The latest being Japanese automakers Motor Co and Nissan Motor Co.

Both Honda and Nissan announced on Tuesday the furlough of thousands of workers in the U.S. as the coronavirus pandemic brings the U.S. economy to a virtual standstill. Honda suspended operations on March 23 and the company said its U.S. plants will be closed through May 1. The furlough affects around 30,000 workers.

A spokesman for Honda, which employs about 18,400 workers at plants in Lincoln, Alabama, Greensburg, Indiana and Ohio, told Reuters that the company would guarantee salaries only through Sunday, April 12. 

Honda's U.S. factories build almost all of the models sold in the U.S. The company's Indiana plant produces the Civic sedan and CR-V SUV. While the popular Honda Accord sedan has been assembled in Ohio since 1982.

"In addition to the impact of COVID-19 on the marketplace, stay-at-home orders in many cities and states prevent consumers in a number of markets from purchasing new vehicles," Honda said in a statement. "As a result, Honda must continue to suspend production in order to align product supply with a lack of market demand."

Nissan said it was temporarily laying off about 10,000 U.S. hourly workers effective on Monday. The automaker suspended operations at its U.S. manufacturing facilities through late April due to the impact of the outbreak.

Nissan has four manufacturing facilities in the U.S., two of them are in Tennessee. Nissan's Smyrna, Tennessee Vehicle Assembly Plant is the highest-volume vehicle assembly plant in North America, with an annual production capacity of 640,000 vehicles. The plant produces the Nissan Altima, Maxima, LEAF EV, as well as the Rogue and Pathfinder SUVs.

Nissan's plant in Canton, Mississippi has an annual production capacity of 450,000 vehicles and produces the Nissan Altima, Frontier, Titan pickup, Murano and NV Cargo and Passenger Vans.

Nissan, which is Japan's second biggest automaker, has already experienced a sharp decline in its global sales before the coronavirus pandemic began, after the arrest of its former CEO Carlos Ghosn in 2018. Ghosen was accused of misusing company funds for years and using them to finance a luxury lifestyle.

Nissan reported a 30% decline in sales for the first quarter of 2020 when the company announced its earnings on April 1. Likewise, Honda's North American sales are down by 23% in the first quarter of 2020.

Global automakers are facing an unprecedented drop in their U.S. sales, as the coronavirus pandemic enters its second month. The U.S. now has the most coronavirus cases worldwide. 

Fiat Chrysler Automobiles NV announced on Monday its extending the shutdown of U.S. and Canadian plants until May 4.

The world's second biggest automaker Toyota Motor Corp has also halted its U.S. and Canadian production through April 17. A Toyota spokesman said it has not furloughed full-time U.S. employees as of today.

U.S. Automakers General Motors & Ford Have Also Stopped Production

U.S. automakers General Motors and Ford Motor Co idled their U.S. factories last month. Last week, Ford announced it was extending the shutdown of its North American plants, including two truck plants in Louisville, Kentucky, as a result of the worsening coronavirus pandemic. 

Ford's Kentucky Truck Plant produces the Ford F-250–F-550 Super-Duty trucks, as well as the Expedition and Lincoln Navigator SUVs. The plant employs around 8,600 hourly workers. The Kentucky Truck Plant in Louisville, was supposed to resume production on April 14. However, now it's unclear when the plants will resume production.

Ford also announced that 300 of its top executives will voluntarily defer 20-50% of their salaries to conserve cash.

"We have taken significant actions to reduce costs and to fortify our balance sheet and cash position in this unprecedented situation," Ford CEO Jim Hackett wrote in a letter to Ford employees two weeks ago. "Candidly, though, we need to do much more given the sharp drop-off in demand for new vehicles and the shutdown of our plants worldwide."

Ford's chief rival General Motors has also idled its U.S. factories. On Thursday, March 26, the automakers announced it would suspend production at its North American factories indefinitely after the company hoped to get them reopened by March 30. 

GM also said its laying off 6,500 salaried employees and cutting executive pay, an indication that the coronavirus pandemic will take a serious financial toll on its business this year.

The 6,500 GM employees who cannot work from home will go on paid leave, which the company refers to as "salaried downtime paid absence." The workers will receive 75% of their pay and retain health benefits. Senior executives will take a pay cut of 5% or 10% and defer 20 percent of their salaries. 

GM notified the rest of its 65,000+ salaried employees globally it will temporarily cut 20% of their salaries. GM also said it was also suspending development work on some new models as the U.S. 

The good news is that new coronavirus cases are beginning to level off in China and Europe as a result of strict measures to keep people indoors and isolated, so auto production outside of the U.S. may resume soon. 

However, once automakers reopen their U.S. factories, demand for new vehicles will determine their output. The economic fallout from the coronavirus is expected to result in skyrocketing employment numbers and economic uncertainty caused by it will likely lead to a major decrease in new car sales for the rest of the year.

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