Beyond the pandemic, Alabama auto industry faces an uncertain road

Hyundai normally runs its Montgomery assembly line 24 hours a day, five days a week, rolling out the company’s most popular vehicles and sending them to dealers across North America. That didn't happen right away when the plant reopened after a nearly two-month production shutdown.

The plant started building cars on May 4, but only for about seven hours a day. The Daimler AG Mercedes Benz plant in Vance restarted its assembly line April 27 but shut it down again three weeks later.

With Mexico reluctant to reopen its manufacturing plants, Alabama’s automakers weren’t able to get enough parts through their supply chain to keep the lines turning.

“It’s affected everybody, not just Alabama,” state Commerce Secretary Greg Canfield said.

Over 40,000 people work in the auto industry here building more than a million cars a year. Only four other states build more cars than Alabama, and only two others export more. All of that fuels the state’s economy — Hyundai alone had a nearly $5 billion economic impact on the state in 2014, and that was before waves of expansions. All of it was growing when the pandemic arrived.

Turning it back on now isn’t as easy as flipping a switch.

Most parts suppliers in Mexico were expected to resume operations by late May, meaning vehicle parts would start flowing into Alabama plants soon. But that’s just one of many issues the industry is facing.

A spokesman for Hyundai Motor Manufacturing Alabama said the company delayed plans to start ramping up production until May 25, but the supply chain wasn’t the only factor in that decision.

The company implemented a range of new safety procedures during the shutdown after an employee died of COVID-19 complications in April. Those new protocols include shorter work shifts, temperature checks, limited access to the plant, a new disinfecting and cleaning process, and mandatory face masks.

“First, we wanted to take a phased approach to restarting the plant and allow us to validate our safety measures to protect the health and well-being of our team members,” said Robert Burns, the plant’s vice president of human resources and administration. “Second, we did need to manage the available inventory that was either on-site or in process at our suppliers in the surrounding area.”

Just because they’re able to build cars doesn’t mean people are ready to buy them.

Sales of new and used cars collapsed in April and were expected to drop by over 15% overall this year, according to a forecast by research firm IHS Markit. That’s a deeper trough than the Great Recession, a period that sent General Motors and Chrysler into bankruptcy. And it’s a startling about-face for an American auto industry that just finished a decade-long boom period in which sales nearly doubled since 2009.

The shutdown arrived as Alabama automakers were pouring millions into several major facility expansions.

Toyota was spending $288 million building two new production lines at its engine plant here. Separately, a $1.6 billion Mazda-Toyota pl was scheduled to begin production next year, creating 4,000 jobs.

Hyundai was in the middle of a $410 million expansion to build its first pickup, the Santa Cruz, in Montgomery. That project was announced last winter, as the auto industry boom was in full swing, and was expected to create 200 new jobs at the plant and 1,000 new jobs across the River Region.

In February, Hyundai reported an all-time record sales month for North America.

By March, Hyundai sales were down 43% year over year. In April, they were down 39%.

Still, Burns said construction has continued and the timeline for the expansion hasn’t changed.

But the industry has, and so has the workforce.

Canfield said the manufacturing industry was facing “labor shortages of a pretty widespread magnitude” before the pandemic, and now must deal with replacing workers who decided to retire or change careers during the shutdown. “We’re seeing this in other industries as well,” he said.

The state is working through the regional college system, the Alabama Workforce Council and AIDT to help displaced workers land industry certifications and strengthen the pipeline. Canfield said he’s confident they’ll succeed, despite the uncertainty ahead for the state and for the auto industry.

“(Manufacturers) are going to ramp up slowly. That will give us plenty of time for the workforce to be reconnected into those operations,” he said.

“I think we’re going to be fine.”

USA Today contributed to this story. Contact Montgomery Advertiser reporter Brad Harper at bharper1@gannett.com.

Buying a car during the pandemic

The uncertainty created by the coronavirus pandemic has made people reluctant to buy cars, meaning dealers are rolling out special offers to sell a growing stock of inventory. Here are some things to keep in mind if you decide to look for one of those deals now, via Consumer Reports.

Shop online

Comparing deals from different dealers will not only give you a better idea of what you can get, it will also keep face-to-face interactions to a minimum. You may only need to show up for a final test drive and signing of documents.

Buy online

Over 30% of network dealers participate in TrueCar’s Buy From Home program, and the number is growing. Autotrader has its own Dealer Home Services with online tools for no-contact interactions. You can often schedule a test drive without a dealer present. Paperwork can be mailed to you, and some will even deliver the car to your home.

Be careful with long-term loans

There are deals out there with low or even zero interest rates for a loan term beyond the typical 30-60 months. But experts caution that you may end up owing more than the car is worth before you pay it off.