Wednesday, August 20, 2008

GM white collar cuts

The 2009 model year is just about upon us. I usually don't pay much attention to the new model year. And I'm not paying much attention to it this year. About 2 years to go on my Honda payments, then I hope to be able to ride payment free for a good while.

One thing that caught my attention recently was the announcement of GM white collar job cuts. That's an astounding number of people. The company itself must just be enormous as 5K jobs was only 15% of the white collar head count.

Still it matters. But the thing is that these are dangerous types of cuts as the short term effect [cost savings] is good but the long term effect [reduced ability to create new product] is bad.

You won't see the effect of these cuts for a while. I've worked in R&D type companies, and in the short term it can be very tempting to just cut R&D to be profitable or more profitable in the short term [like the next 2-6 quarters]. R&D is lead time based. The money you spend today won't create product or revenue until the future. So if you cut today you put money in your pocket with no visible effect on day to day operations.

But by cutting R&D today you are also cutting off the pipeline for tomorrow. In the near term I expect these GM cuts will have little effect. After all for the 2009 year the engineering and planning work is done. The cars are in production and soon to be in the dealer showrooms. I don't know much about automotive product development cycles but I suspect much of the 2010 model year engineering and planning work is also largely complete.

So the effect of these R&D cuts may not be really seen until the 2011 model year with less and less competitive products on the marketplace. That's what happens in R&D. Letting go engineers, designers, product managers, testers, production planners, ergonomics, sound, safety, reliability, researchers, all these people make the future pipeline of new vehicle.

These people are the decision makers. Not big picture "This is What We're Doing" decisions, but decisions like what headlight to go with; or coming up with a fix for a design problem reported from the field which is causing a lot of annoying warranty repairs. With less of these decisions being made then they may not be able to advance the products as much.

1 comment:

racingrich said...

Excellent point but you missed part of the issue. GM is creating an imbalanced management pyramid. Most of cuts they are making are at the bottom of the pyramid with first line supervisors, engineers, quality engineers..etc. The people that make the day to day decisions to keep plants running effeciently. The top of the pyramid is unaffected and the top 10% made 90% of the salary wages. These decisions will be seen immediately with quality issues and ineffecient plants as well as future launches of new products. The decisions they are making are merely a bandade on a gapping wound. The bleeding will continue, only slower and GM will simply have a slower, more painful demise.