Major Automakers in the US, Germany, Japan Announce Workforce Reduction Plans
Domestic Market Maintains Employment Based on Domestic Demand but Uncertainty Increases
"Easing Employment Retention Subsidy Requirements... Support Criteria Also by Business Unit"
[Asia Economy Reporter Kim Ji-hee] The global automotive industry is embarking on full-scale restructuring due to the impact of the novel coronavirus infection (COVID-19). As exports have been blocked by a decline in global demand, the difficulties faced by domestic automakers are also increasing, leading to calls for strengthening employment retention support policies.
According to the Korea Automobile Manufacturers Association on the 14th, global companies that had been planning restructuring or workforce reductions have accelerated their restructuring in response to the demand contraction caused by the COVID-19 crisis. First, U.S. GM decided in May to reduce 8% of the workforce at its autonomous driving subsidiary 'Cruise,' and last month decided to cut 680 employees working three shifts at its Tennessee plant. French Renault also announced plans to reduce 15,000 employees across six global plants, including 400 out of 3,200 at its Slovenian plant in May and 4,600 at its French plants.
German BMW decided not to renew contracts for 10,000 contract workers. It is also considering a plan to reduce 5,000 regular employees through voluntary retirement support. Daimler, which announced a plan to cut 10,000 employees by 2022 at the end of last year, revealed last month plans to reduce an additional 10,000 employees by 2025.
Nissan, which has already declared its withdrawal from the Korean market by the end of this year, is discussing a plan to reduce about 20,000 employees at its global plants. In addition, Mitsubishi is pushing for workforce reductions at its Thailand plant, and luxury car manufacturers such as Aston Martin (500 employees), Bentley (1,000 employees), and McLaren (1,200 employees) have announced workforce reduction plans.
The reason global automakers are cutting jobs one after another is the forecast that global automobile demand will significantly decrease this year due to the worldwide spread of COVID-19. Already, the global automobile market size from January to May this year recorded only 26.226 million units, down 29.7% compared to the same period last year. Sales in major markets such as the U.S. (22.9%), Europe (40.2%), and China (24.8%) all declined simultaneously. An annual decrease of around 20% is expected this year.
On the other hand, domestic automakers are maintaining employment through steady domestic sales despite the COVID-19 shock. However, as demand in major export markets such as the U.S., Europe, and South America has sharply declined, exports continue to decrease, increasing uncertainty in employment retention, according to the association.
Jung Man-ki, chairman of the Korea Automobile Manufacturers Association, stated, "Despite difficulties caused by the COVID-19 crisis, our automakers have made efforts to maintain employment by adjusting production line speeds (job down), but recently some temporary shutdowns have become inevitable," and added, "It is necessary to strengthen government support measures such as expanding employment retention subsidies and improving systems." Specifically, he pointed out, "It is necessary to relax the requirement for the scale of temporary shutdowns for employment retention subsidy support from the current 20% to the previous 1/15, and to improve support criteria by converting them from the entire business site to each business division such as production, sales, and research and development."
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