Why GM Is Laying Off Workers Despite Good Profits – That’s Just What Large Companies Do

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GM’s had several quarters of good profits and yet it’s laying off workers – 4,000 white collar jobs. Why? Because this is what large companies do. There’s no mystery here, large companies do reduce their workforces over time, this is just the way the world works. It’s small and growing companies which produce both economic and jobs growth. Thus there’s no mystery here:

GM is laying off another 4,000 workers, the company acknowledged on Monday. The cuts are on top of thousands of job cuts the company announced last November. Those earlier cuts were concentrated on the factory floor, with GM shuttering five manufacturing plants in the United States and Canada. The new cuts, by contrast, are to salaried white-collar jobs. Individual workers will be notified over the next two weeks, the company said. GM has reported billions of dollars of profits over the last three quarters. But CEO Mary Barra argues that GM still needs to cut its costs to prepare for the dramatic changes facing the automotive industry in the coming years.

Don’t worry about the reasons that Barra is putting forward, they’re just excuses, perhaps reasons if you want to be polite. Losing workers is simply what large companies do.

Think it through a little, productivity does indeed rise over time. Or at least we dang well hope it does. And a large company is likely to be in a competitive business. One where it’s not only not going to be able to capture much more of a mature market, one not growing very much, but also one where its competitors are going to be growing their own productivity too. So, there’s no great opportunity to expand production.

But what is rising productivity? It’s being able to make more with the same labour input, or the same with less labour. So, if you can’t sell extra production and productivity goes up what are you going to do? Lay off workers of course. Which is what large companies do.

It’s a basic fact about the economy that large companies tend to lay off workers over time. GM’s no different, laying off workers is just what companies like GM do over time.

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Shadeburst

Large companies should be in the best position to see new opportunities and to take advantage of them. That’s what the skunk works concept was about. Now most businesses are more invested in the loss-control activity called diversity. Mary Berra is just doing what she’s paid to do. I’d like to say that she’s sticking to the knitting except that some champion of justice would chew my head off for that.