Maybe I miss the point, but why wouldn’t the ones that easily find a job (or maybe even have a next job at hand) take the payout for extra money while the ones that desperately don’t do any work or are not performing would stay? Wouldn’t this result in the wrong outcome?
You're not missing the point, though maybe it won't go as badly for a older company like GM. I got to witness this failed strategy first hand at AOL around 2010.
The people who opted into the VSP were the ones who could easily find another job, and were happy to take the money. Some of them even came right back in a consulting role after a 2 month cooling off period. The people who never even considered the offer were the low performers who knew they were getting paid far more than they could hope to command on the open job market.
GM already has a list of employees they have considered laying off to cut costs. They're hopeful that the people who volunteer are mostly on this list. Now GM can refuse to accept volunteers who they consider critical to business operations. Those people should immediately demand large pay raises.
That being said, this is pretty shitty severance package, especially since it's only being offered to people with 5 years or more of service. Unless you know you can find another job quickly why would you take a 5-12 months of pay with no extra benefits? (COBRA is about the most expensive way I can imagine to pay for private health insurance for many people.)
I suspect the worst case scenario for GM is they are about to have a ton of experienced and competent employees with important institutional knowledge walk out the door, and find themselves left with a bunch of new hires that aren't really sure how to keep the business operating at corporate.
I worked at a GM sized company right out of college and they did a voluntary early retirement thing like this. It was one week’s salary for every year of service with the company plus they’d pay your health insurance premiums for the rest of the calendar year.
They had a lot of people who planned to retire in 1-3 years take that offer and I knew quite a few who came back within a couple of months for a higher salary than they previously had.
The severance package is proportional with the length of employment at GM, which is highly correlated with the age. In this country you can't discriminate based on age, so this is a legal way to thin out the ranks of the older employees.
As an aside, in the UK and EU you also can't discriminate based on age, but that means that you can't do anything based on length of service. For example, it is illegal to place a job advert requiring "x years of experience in z" because that requires you to be a certain age.
so is this desirable to the company because older aged workers aren't as productive as a younger person? I would've imagined that in most skilled trade, experience accounts for a lot.
The article states that this offer is for the white-collar employees
General Motors will offer voluntary buyouts to a “majority” of its U.S. white-collar employees, according to a letter sent to workers Thursday from CEO Mary Barra.
> In this country you can't discriminate based on age
You can’t legally discriminate against people because of age over 40; otherwise age discrimination is legal.
Also, most forms of illegal discrimination are routine, much of the work of HR and management training in regard to discrimination exists to make sure that hiring managers know what domcumentation needs to reflect irrespective of the true basis of personnel decisions so that illegal discrimination is difficult to prove (that’s not how it is framed, of course, because the training itself is part of the record.)
While I'm sure people playing that game are a sizeable chunk of the pie chart who will take the buyout I think that people looking to get out of their current role for an actual reason independent of "I think I can take the cash, get a new job and come out ahead financially" will make up the overwhelming majority. This is GM we're talking about, not Trendy Tech Startup #8239422834237.
It's often a numbers game and where anyone that passes the interview at the same level = the same so to them (management) it's just about reducing the numbers. No 1 is better or worse so it makes no difference who goes.
Having gone through the 2008 crash in an automotive family - it can be extremely difficult to find a new job without having to relocate or take a significantly longer commute.
The physical nature of engineer and manufacturing means facilities are spread all over a metropolitan area. Particularly, manufacturing tends to be built agricultural property that's on the edge of suburbia.
I worked at a company which had a VSP in the largest location. Effectively a lot of the best people left. It doesn’t seem like a great strategy. Unfortunately it was partially done that way due to the local employment laws.
> General Motors will offer voluntary buyouts to a “majority” of its 58,000 U.S. white-collar employees,
> The buyout offer comes after the Detroit automaker said last week it would terminate about 500 salaried positions globally.
How does that work? The only sensible explanations I currently see is that either there's some new technology that replaces _hundreds_ of people or that... they had _hundreds_ of people that weren't doing anything useful?
I find it difficult to reconcile. Am I missing something?
If a car company needs to cut costs they've got a variety of options.
They can trim the product line-up - Wikipedia tells me Chevrolet alone has a product lineup of 10 cars, 12 crossovers/SUVs, 5 vans, 5 trucks, and 3 commercial trucks.
Or they can reduce the number of marques they operate (Chevrolet is just one of seven brands)
Or they can stretch out product refreshes. Maybe SUV #8 only needs a 'facelift', rather than a new 'generation'
They can also cut long-term investment in products they think don't have a long-term future. Would you invest in a new factory for casting engine blocks, when everyone knows EVs are the future? If you're flush with cash you might bet on both horses, but if you need to tighten your belt you might not.
I'd wager that, while the 'majority' of employees are offered the buyout, the EV folks probably aren't among them.
While it use to be different, many of these vehicles are sharing common development platforms. Particularly, between brands, the core vehicles are shared with mostly changes to fit-and-finish and easily swappable parts (like tires, brakes, shocks, struts, etc).
It’s a forcing function. In the army people get shot and you fill the gap somehow. Same concept here. They squeeze and the remaining people deal with it as best they can.
Remember these companies are run by Excel. They kicked themselves in the ass when the pandemic started by shutting down and running “We’ll miss you” ads. This is a similar, equally dumb move.
Rapidly rising interest rates have hit payment sensitive car loans first (since they are shorter than housing and the collateral is harder to collect) and there was already a collapsing COVID bubble in prices due to supply chain disruptions.
They likely won't sell as many cars at relatively high margins over the next few years as they were planning on so they're looking to cut costs.
> ...won't sell as many cars at relatively high margins over the next few years...
To judge by the venting of a car-buff coworker, who needs to buy a slightly-affordable car for his son, the days of lower volumes & margins on cars may be a bit further out.
The thing you are missing is that managing large organizations of people is hard, and while you can reduce it to a spreadsheet it's a little rude to do that.
Anyway, that GM is offering buyouts means they think the recession that has been on the horizon for N number of months is finally here.
That did spark a thought: They are set up for "producing, selling and servicing" X vehicles a year, but the market shrunk and the best they can hope for now is a 1/100 of X... Thus, they don't need as many people. Or in other words "downsizing to match the reality".
Well, some percentage of people won't accept the buyout. It's not as if it's just free money -- it's free money for the stress and anxiety associated with being jobless. I'm sure they have a good idea of the number of people that they project will leave based on this, and they can always counteroffer if it turns out that more people than they expect will quit. The upshot to this over layoffs is that people can self-select. If 10-20% leave that's probably well within expectations.
i wonder if these buyouts are more or less expensive than severance packages.
If you know your severance would be higher than the buyout, why would you accept? If the buyout is higher than severance, then the company is "losing" money doing the buyout isn't it? I suppose keeping good reputation/PR is worth something...
It’s not necessary for someone to be “[not] doing anything useful”, but a much lower standard of “not doing enough to useful to be worth paying them what we pay them”.
If you have hundreds of people creating $50K/yr of value and you’re paying them $80K/yr, you’re losing money even though they’re all doing something useful.
Good point. And it opens up the broader topic of measuring impact/value.
My personal experience from the startup world is that I fill in "auxiliary" but crucial roles which at the same time are not roles that can have an economic surplus (nah, not even break-even!) if we were to go "a dedicated person for each role".
Paraphrasing one of the up-thread commenters: _Yes, it's hard_.
> U.S. employees who are approved for the buyout will be granted one-month pay for every year they worked up to 12 months, as well as COBRA health coverage. They also will receive prorated team performance bonuses and outplacement services. Global employees will receive base salary, incentives, COBRA and outplacement services
I don't think people realize what a shock wave is coming for the auto industry.
1. High interest rates make cars a lot more expensive, suppressing demand.
2. The inventories on dealership lots have been rebuilt over the last 6 months, hiding a drop in consumer demand.
3. EV's take much less labor to manufacture than combustion engines. Take a look at the regularity of an EV compared to a combustion vehicle. That regularity makes robotic assembly more feasible.
4. We're hitting the first knee on the "S" curve for EV adoption. We're moving from the slow "early adopter" phase to the "mass market acceptance" phase.
5. The transition is creating a large group of hesitant buyers. Many people are unsure what their next vehicle purchase should be, so they delay the decision. They keep maintaining their current vehicle, purchase a used car as a stop gap, or keep relying on their current alternative -- bus, Uber, mooching rides off friends, whatever.
In other words, demand for combustion engines will drop faster than demand for EV's will rise.
6. The other points mean that manufacturing capacity is higher than demand, which means lower prices. Which means shrinking of already low profit margins, perhaps even into the negative.
7. And EV's won't be a panacea. Their price is dropping too. Tesla will be blamed for leading the price drops, but it's really the Chinese leading that charge. BYD has an €8200 vehicle coming soon. It's not a golf cart, it meets full Euro safety specs. BYD has a stable of European brands (Volvo, Polestar, MG and Lotus) that it can and will use to sell Chinese cars at Chinese prices without the Chinese stigma. (cf MG4).
8. Look up the "Altman Z score", and then take a look at this: https://cleantechnica.com/files/2023/03/Graph-Tony.png A score below 3 predicts upcoming bankruptcy. People complain that Tesla is over-priced, but IMO it's that the others are underpriced -- their price includes a significant bankruptcy risk. Not all of them will go bankrupt: once the survivors lose the bankruptcy risk discount, their value should go up.
9. The usual risks of large companies riding a significant technology change, coupled with significant supply chain challenges.
10. HN is highly skeptical about autonomous driving, but if it does happen it will have a significant unpredictable change on the market.
11. The uncertainty of the Inflation Reduction Act. Manufacturers are betting heavily on the subsidies in the IRA, but the chances of a rug pull in 2024 are high. OTOH, those not betting on the subsidies will lose heavily if the rug isn't pulled.
12. 80% of Lithium refining is done in China, and the odds of a trade war with China seem high.
13. Many legacy manufacturers make a surprising proportion of their volume and profit selling into China. That seems highly vulnerable.
I'm sure I'm wrong about some of those points, but even just a few could be devastating.
> but were hoping to leave this would be a major downer.
it would suck. But it also means that you are needed, and thus, would be in a position to demand a pay rise (or leave, which you were already hoping to do right?).
