GM's new plan: Get ready for huge layoffs
Posted
Jan 09 2009, 04:01 PM
by
Andrew Horowitz
Rating:
In a recent internal memo, General Motors' (GM) management has begun the grim task of preparing employees for the inevitable: Job cuts. MASSIVE job cuts.
In order to remain compliant with the provisions of the $4 billion of "loans" from the TARP, GM is looking for ways to survive and restructure according to the government's forced timetable.
Now the plan is to re-engineer their entire business model utilizing the idea of Zero-Based staffing. While that may not be a new idea, it is one that is usually associated with a newer company. How will GM attempt to restructure their current operations from the ground up? Good question. Here is what they are considering. readmore]
By zero-based, management will theoretically design their annual budget around the concept that they have a clean slate, no employees, no orders and no inventory. This also could mean that they start with no staff and then build out what they estimate they will need, as opposed to making cuts. The approach, which is based on the theory of "zero-based budgeting," usually leads to much deeper reductions.
This is part of the discussion from GM's human resource department:
"Yes, this will include a reduction in salaried workforce this year. In support of our restructuring, there is a cross-functional group of people working on an initiative, you may have heard of this, Zero Based Staffing. And this initiative is an opportunity to right size our organization."
Make no mistake, there are many more problems that need to be addressed before GM returns to profitability. For example, there needs to be a greater level of coordination with the unions if GM is going to survive. (See Andrew on Fox Business: Union Busting)
Beyond that, management has discussed with employees that they are basing many of their forward metrics on current industry projections, product portfolio, manufacturing capacity and other drivers. One target of concern for GM management has been the expansive and somewhat bloated dealer network. For example, they will be considering cutting the number of dealers in favor of direct sales to the public. The hope is these measures will help GM better forecast their staffing requirements over the next several years.
Troy Clarke, President, GM North America also talked to employees and explained many of the ideas regarding the dealers and model changes. Admittedly, the items that are planned to be implemented should have been done five years ago.
It appears that the net effect of these radical changes will be huge layoffs beginning in March. One reason to postpone layoffs is the planned cut to severance packages that will take effect after March 1. So, not only are employees going to be on the edge of their seats until then, waiting for their special day, but once it comes they may unfortunately find their loyalty will be repaid with a much smaller gift than they expected.
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Andrew Horowitz is a money manager and the founder of Horowitz & Company. He is also the author of the bestselling book, The Disciplined Investor . Check out his latest investment idea or listen in as he hosts, The Disciplined Investor Podcast.
