Low Fuel Prices: Car Factory Jobs Being Cut Due To Decline In Demand for Smaller Cars

Jan 02, 2017 08:14 AM EST | JP Olvido

Due to cheap oil prices, buyers are more inclined to get sport utility vehicles, pickups, and crossovers. Demand for smaller cars may get lesser as oil prices continue to dip.

A lesser demand for smaller cars. Factory works in towns such as Lordstown in Ohio aren't all that happy about the prices of fuel being low. People are starting to have disposable income to purchase bigger and expensive cars thanks to dipping fuel prices.

People working at General Motors Co. factory in Ohio are deeply impacted by the lesser demand. The factory concentrates on making the Chevrolet Cruze, a compact car whose sales have dipped along with other small vehicle brands.

General Motors plans to cut 3,300 jobs at their car factories in order to cope with the shift in demand already including the plant in Lordstown.

Car manufacturers have apparently made the wrong decision to invest in production capacity for sedans and compact cars in the last few years. From 2010 to 2015, the capacity of North American factories for smaller vehicles was at an additional 1.2 million cars per year compares to 800,000 for bigger vehicles such as trucks, crossovers, and sports utility vehicles.

Apart from General Motors, Fiat Chrysler cut 1,300 jobs at one of their sedan factories back in July of 2016. Ford Motor, Co. has shown slow production without cutting jobs despite the shift in the demand for smaller vehicles.

One reason for the dip in fuel prices is the plunging price for oil barrels. The price of oil barrels even fell to more than 70 percent at one point versus 2014 price levels. The plunge in oil barrel prices can be attributed to simple economics of supply and demand.

Middle Eastern countries who sold oil to the United States only are now competing for Asian Markets causing a drop in their prices. Aside from the price plunge of oil barrels, car manufacturers are gravitating towards building more energy-efficient cars.

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