Is the auto industry headed for a crash?

Plant closures in Europe. Layoffs in America. Plunging sales everywhere.

The auto industry is in trouble — and we could all end up suffering the consequences.

EV woes have hit Ford as well. Later this month, the carmaker will suspend operations at its F-150 Lightning EV plant for the rest of year.

Let's start with Volkswagen. The company stands proud as the biggest carmaker in Europe, and it has never closed a factory in its home country of Germany.

Until now.

Punch buggy blues

At the end of October, the company asked workers to take a 10% pay cut as part of an ongoing campaign to cut costs across the VW Group. Industry insiders fear that domestic plant closures — the first in the company's 87-year history — could be next, with up to three German factories shutting down, costing more than 100,000 jobs.

“Management is absolutely serious about all this. This is not saber-rattling in the collective bargaining round,” warned Volkswagen works council head Daniela Cavallo in a speech to employees.

These cuts would reduce the number of domestic plants to seven and cut the workforce by a third.

The plants that do stay open would also endure cost-cutting measures, according to a separate report, with downsizing and wage freezes on the table.

VW aims to save about €10 billion (roughly $10.8 billion USD) by 2026.

Thomas Schaefer, the head of the Volkswagen brand, has previously noted that German factories are operating at between 25% and 50% above targeted costs. This is largely due to Europe’s high energy costs, which German carmakers say are four times higher than in China and the United States.

Compounding this problem are increased competition from Chinese brands and a lack of demand for electric cars.

Volkswagen hasn’t commented on the report, and it hasn’t announced plant closures or layoffs yet.

Previously, Volkswagen had considered buying Audi's struggling EV plant in Brussels. Those plans changed, and with no other suitable buyers on the horizon, the plant may close its doors for good.

The outlook isn't much sunnier stateside, either.

GM feels the heat

General Motors is laying off some 1,000 software workers globally, 600 of whom are employed at its tech center in Warren, Michigan.

In a memo to workers obtained by Automotive News, GM said the cuts were to enable it to “move faster, pivot when needed, and prioritize investing in what will have the greatest impact.”

This is certainly a pivot from the last several years, in which GM has been expanding its software team to help with its electrification and autonomous efforts. The company had predicted that those services could generate $25 billion in revenue by 2030.

While General Motors has claimed that these cuts target "software and service" employees, that's not exactly true. The layoffs come from GM's Ultium division, which is the sub-EV company GM created to differentiate it from its gasoline engine department.

I can confirm that Ultium has let go a number of thermal engineers without warning. Thermal engineers, as you might guess, are crucial to thermal management: keeping EV batteries, power electronic systems, and motors from overheating.

Is this a sign that GM is no longer all-in on electric and is drastically reducing R&D on future EVs?

Sure looks like it.

Ford's loser Lightning

EV woes have hit Ford as well. Later this month, the carmaker will suspend operations at its F-150 Lightning EV plant for the rest of year.

The highly touted electric pickup loses the company $40,000 on each vehicle sold. Hardly sustainable, especially given that Ford's Q3 net income is down 26%, and cost issues have caused it to drop its full-year adjusted earnings projection to around $10 billion.

Mercedes: Bust in class

The luxury car market isn't what it used to be, either.

Mercedes Benz has cut production on its S-Class line in response to declining sales: down 13% in China, 19% in the U.S., and 27% in Europe. The high-end vehicles have been rolling off the company's cutting-edge Factory 56 assembly line in Germany since 2020 — always in at least two shifts.

Now, for the first time since Mercedes opened what it touts as the most modern car factory in the world, one shift will suffice.

The plant also builds the electric EQS as well as Maybach and AMG models. Mercedes will refresh the S-Class next year, so demand could pick back up with a new model.

Ram tough

Stellantis CEO Carlos Tavares has been heaping scorn on his previous U.S. management team and no wonder: Third-quarter sales in North America were a disaster, falling 20%, and down 17% for the year.

That's bad news for iconic American brands Jeep, RAM, Dodge, and Chrysler — and it has investors heading for the exits.

But times are tough all over for the car conglomerate. Sales in Europe fell 17%, with even Maserati relegated to the slow lane with a stunning 60% drop.

Business isn't much better in China, India, and Asia Pacific, where sales fell 30%.

Border run

And in a move that is sure to infuriate the UAW, Tavares plans to move production of Ram's full-size 1500 pickup truck from the U.S. to its Saltillo, Mexico, plant, which already produces Ram heavy-duty pickups and vans.

While Mexico offers lower labor costs, no doubt the move is also to prevent the UAW from choking off production during any future strike. We think that’s the same reason Ford moved part of its heavy-duty truck production to Canada. It’s a game of chess, and both Ford and Stellantis are working to escape checkmate.

For more on the ongoing car industry crisis, check out my video below: