Cutting to Profitability?

On the way to work this morning, I heard this on the radio. Excerpts from the Detroit News:

General Motors Corp. will roll out retirement incentives to nearly two-thirds of its 72,000 hourly workers and may have to further cut U.S. production in 2008, which could mean eliminating shifts or closing plants, the company announced Thursday.

It was unclear how many workers GM hopes to clear out, but CEO Rick Wagoner said 46,000 blue-collar workers will get incentives to retire, setting the stage for another dramatic reduction to GM’s work force. More than 5,000 workers received offers earlier this month. The second phase of the buyouts will be rolled out in February.

Wagoner told Wall Street analysts gathered at a Dearborn conference that even after those workers are gone, anemic U.S. auto sales may force cuts at assembly, powertrain and stamping plants throughout the country.

U.S. industry sales are 1 million lower than when GM crafted its 2005 turnaround plan that called for closing 12 factories. GM later added another plant, in Massena, N.Y., to the closing list. With all but a few of those plants now closed, GM still has too much factory capacity given the demand for its cars and trucks.

Gettelfinger said plant closings are not under discussion. “We’ve gotten the strongest plant commitments we ever had and we intend to enforce those,” he said.

GM, as part of the UAW contract, promised to keep products flowing to dozens of U.S. factories for years to come, but the job guarantees are contingent upon having enough consumer demand for cars and trucks. The deal also doesn’t restrict GM from cutting shifts or reducing the line speed at factories.

By the end of 2012, Wagoner said he wants to cut structural costs as a percentage of revenue to 23 percent from 34 percent in 2005.

Of course, the UAW is crying “FOUL!!” But you know, read the contract that was signed and ratified by the membership, and you had to know that this had to be coming.

Cutting costs is necessary, but cutting too deep is dangerous.  What seems to be the short term solution to a cash crunch and bad decisions is to sharpen and swing the ax, but it seems that the worker and not the managers making the bad decisions are the ones typically bearing the brunt of the cuts.

Yes, I know that deadwood would need to be cut from the corporate tree for the tree to continue growing. But cut too much, and the tree will die.  Cut in the wrong place, and the result is the same.  Is this going to be too much? Only time will tell.

I know that there are rumors that there is going to be another round of retirement packages at my work even before the above announcement was made by “that” company down the road. But nothing has been confirmed nor denied by my management.

What this does do is land another blow on the already shaky Michigan economy. Michigan (and the auto companies) certainly didn’t need this news, especially on the week right before the North American International Auto Show. All this just makes you think that GM is all show but no substance. If anything, the timing couldn’t be worse for GM for an announcement of this nature.

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About Tom Roland

EE for 25 Years, Two Patents - now a certified PMP. Married twice, burned once. One son with Asperger's Syndrome. Two cats. Conservative leaning to the Right. NRA Life Member.
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2 Responses to Cutting to Profitability?

  1. Pamela Reece says:

    I heard this news and wondered the same thing myself. Whoever the genius was who thought making this announcement right now, is a knuckle-head. It is counter-productive not only to GM, but to the entire U.S. auto industry. It’s idiotic moves like this that hurt American auto manufacturers, it’s employees, the economy and America. What a lame-brained move!!

  2. jimmyb says:

    It’s going to get uglier before it gets better.
    I wonder if I’m going to have a job at all in the near future.

    There’s almost nothing in our newspaper jobwise except for nurses, and low paying service jobs…

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