Japanese automaker Nissan (OTC:NSANY) closed its U.S. automotive manufacturing plants on March 20 in order to help slow the spread of COVID-19. Now, it's furloughing the workers at those plants -- about 10,000 of them.
Quoting Nissan spokeswoman Lloryn Love-Carter, CNN reported today that Nissan is furloughing workers at its plants in at plants in Canton, Miss. and Smyrna and Decherd, Tenn. Nissan apparently told its workers to apply for unemployment through at least April 27, indicating that it hopes to restart production then.
Separately, Reuters reports that Honda Motor (NYSE:HMC) will also furlough 14,400 of its workers in plants scattered across Ohio, Indiana, Alabama, Georgia, and South Carolina. Honda is not planning to restart production until May 1.
Containing coronavirus apparently isn't the only reason for the closures and furloughs, either. The Wall Street Journal reports that March car sales in the U.S. declined 40% year over year, with both Nissan and Honda suffering 48% declines. If homebound consumers aren't buying cars, it makes little sense for Nissan and Honda to keep building them.
And this could get worse, for automaker stocks and everyone else. It's starting to look like a negatively reinforcing cycle is building, in which laid-off workers lack paychecks with which to buy goods and services. Such decreased demand in turn spurs more layoffs (or furloughing, or both), fewer paychecks, less demand, and so on.
Even after the U.S. beats the coronavirus pandemic, we may very well have a deep recession to deal with before this cycle breaks.