AUBURN HILLS, Ala.
— Alabama’s automotive industry has been on the upswing in recent years, thanks in part to efforts to promote alternative fuel and reduce emissions.
But the automotive industry is struggling to keep pace with a shift in consumer tastes and needs as more and more Americans choose hybrids, plug-in cars and other fuel-efficient vehicles.
The state will trim 1,600 jobs and lay off 500 employees as it moves forward with the restructuring of its auto dealerships and distributors, according to a memo sent Friday to employees.
More: The Alabama Automobile Dealers Association, the state’s auto industry trade group, sent the memo to members in an effort to address concerns about the industry’s economic viability.
“The current economic climate has created a serious threat to our industry, and we are working to find a solution that provides our customers with the same level of protection and quality of life they’ve come to expect from us,” said the memo, obtained by AL.com.
In 2018, Alabama had an unemployment rate of 5.7 percent, the highest of the 25 states.
Industry officials are looking to lure back business from suppliers who have moved to states like Ohio and Texas.
State lawmakers last year passed a bill that gives automakers an extra year to file their tax returns and begin paying taxes, though the legislation didn’t specify what would happen to the existing tax-credit agreements that the state had with automakers.
Many of the incentives that Alabama offers in exchange for state tax credits, such as a tax credit for new vehicle sales and credits for incentives that are tied to fuel efficiency, will expire in 2021.
That’s a change from the current tax-incentive system, which gives manufacturers an extra 15 years to file taxes and make up for lost sales and incentives.
Under the new tax-plan, manufacturers will have until 2021 to complete their tax return and the next two years to pay their federal income tax and sales tax.
Alabama has also signed contracts with suppliers to keep its existing dealerships open, though some of the contracts expire in 2026 and 2027.
It is also planning to make some investments in its local automotive suppliers, with a focus on a number of companies.
Some of those investments could include hiring more full-time employees and hiring more suppliers in other states to fill the jobs lost as dealerships were closed.
Alaska, which has seen a similar move by Alabama, has also said it is planning to move forward with plans to hire more workers.
While the state is still looking for additional funding, it has secured about $2 billion in federal stimulus funds, according a letter from the U.S. Department of Agriculture, which is helping Alabama.
Last year, Alabama was awarded $2.5 billion in stimulus funding to help pay for its automotive infrastructure, including roads and bridges.
Other states that are facing challenges in recruiting and retaining their auto suppliers include Connecticut, Kentucky, Massachusetts, Michigan, New York and Rhode Island.