In news that shocked the automotive industry, General Motors announced that it plans to close five of its production plants in North America, laying off 15% of its salaried workforce, and cut back production of numerous models, especially sedans. While some of the media is trying to spin this as Trump’s fault due to his trade spat with China, the truth is that the state of the US automotive industry is in large part driven by changing consumer tastes that are in themselves the result of government intrusion into the marketplace.
The immediate reason for the plant closures is the growing consumer demand for trucks and sport utility vehicles (SUVs), a long-term trend that shows no signs of abating. While truck and SUV demand dropped several years ago when gas prices spiked above $4 per gallon, the return of relatively cheap gasoline has fueled demand for SUVs from consumers who prefer the size and perceived safety of trucks and SUVs and don’t mind paying more for the extra gas they burn.
That is in part due to government fuel mileage standards that have required auto manufacturers to make cars that are ever more fuel efficient. In order to meet those government-imposed standards, manufacturers have had to resort to all sorts of gimmickry to get every last mile per gallon out of internal combustion engines. Variable valve timing, direct injection, replacing V8s with turbocharged V6s or inline-4s, and auto-stop and -start at traffic lights are among some of the methods used by carmakers. For many people that has made family sedans less desirable than in the past.
Because trucks and SUVs have been largely exempt from those mileage standards, however, they still retain big, powerful V8s that are popular with consumers. And even though they get worse fuel mileage than sedans, many still take regular gasoline versus the premium gasoline required by the fancy engines in most sedans. That makes the cost of gas more or less a wash for many people. And that has resulted in steady demand for trucks and SUVs and an incredible drop in demand for sedans.
Ford already announced that it was ending sedan production, and now GM is forced to follow suit. American autoworkers are the ones who are ending up hurt by this change in consumer behavior whose roots aren’t in a free market allowed to function, but rather in arbitrary edicts issued by unaccountable government bureaucrats.