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Temporary layoffs show a summer of uncertainty is ahead for automakers

Ford factory in Michigan
Getty Images
Ford factory in Michigan

Ford announced production cuts in Ohio, and some suspect there will be more ahead throughout the summer at other auto plants around the country.

Ford said it is laying off 130 workers and cutting production of its medium-duty pickup trucks in Avon Lake, Ohio. The move comes as the automaker sees slower demand for its F-650 and F-750 pickup trucks.

Sales of those models this year are down more than 10 percent, but Ford expects that this is a reflection of many customers waiting to buy a new pickup when the 2018 trucks go on sale later this year.

"We expect the majority of these temporary layoffs will be voluntary and that the workers will return in the fall when we begin to build the new model year vehicles," said Kelli Felker, a Ford spokeswoman.

Across the industry, inventory levels are rising, now standing at 75 days, according to JPMorgan. While some of that growth is due to some manufacturers like General Motors building pickup inventory ahead of a model changeover later this year, the industry overall is confronting a new reality: The pace of sales is slowing.

"We've seen a bit of softening of sales," said Michelle Krebs, an analyst with AutoTrader. "Trimming production is the responsible, disciplined reaction that automakers should take."

That will not be reassuring to thousands of autoworkers who could find themselves out of work for several weeks this summer.

The two weeks around Fourth of July is when the Big Three have historically shut down plants for a summer break. When sales were surging in recent years, those shutdowns were shorter or didn't happen at all. This year, expect some of them to last longer.

"This is the less painful way for automakers to cut inventories ... to extend summer shutdowns," said Krebs. "Otherwise, the automakers repeat the same mistakes of the past. They know what an ugly move it is when they continue to let inventories grow."

Krebs expects the plants producing cars will likely feel the brunt of the production cuts since car sales are down more than 10 percent this year.