Realist, not conformist analysis of the latest financial, business and political news

GM Isn’t Firing 18,000 Bureaucrats, More’s The Pity, Just Offering Buyouts

Hope springs ever eternal to be dashed against the rocks of reality. As with this news that GM is to get rid of 18,000 middle management and other bureaucrats. That, of course, not being what they’re actually doing, Instead, 18,000 people will be asked if they’d like to leave along with a nice fat check – not the same thing at all:

General Motors Co. is offering buyouts to salaried employees in North America with 12 or more years of experience as part of a larger company-wide cost-savings effort.

The Detroit automaker notified employees of the voluntary severance program shortly after it released strong third-quarter earnings, with operating profit of $2.5 billion and 10.2 percent profit margins in North America.

The buyouts are being offered to 18,000 of the 50,000 GM employees in North America.

We could read that as, Whoopee! The famously top heavy company is to get rid of the superstructure which weighs down the performance of the firm. 18,000 to go! But that’s not quite it:

General Motors is offering voluntary buyouts to salaried workers in North America, acknowledging Wednesday that if it does not get enough takers, it may consider layoffs early next year.

So, instead, 18,000 people are offered the opportunity to exchange their nice bureaucratic job for a check. The company then decides how many acceptances of this offer it will, in turn, accept. The cattle prod is that if not enough do then there will be involuntary severances in the future, the temptation being that those who agree now gain that check.

In a statement, the automaker said it will consider involuntary layoffs “after we see the results of the voluntary program and other cost reduction efforts.” Rival Ford Motor Co has also said it plans to cut its salaried staff.

Fiat Chrysler is also said to be considering similar moves, which means all of the Big Three are running along the same sort of lines. That doesn’t bode all that well for Detroit’s larger economy but it’s just great for stockholders. No one ever has said that the thing those firms suffer from is a paucity of middle management – not in quantity at least.

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2 years ago

I assume they calculate that the cost of redundancy payments will be less than the cost of litigation, industrial action and reputation that would accompany straightforward sacking. Good time to do it too, with low unemployment and rising wages people will have somewhere to go. But why target the most experienced employees?

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