GM: Still Downsizing After All These Years

GM (NYSE: GM) has offered buyouts to 3,000 workers at 14 of its plants. Most of these employees have special skills beyond assembly work. Many are electricians and welders. The more seasoned workers will receive $60,000 and full benefits. That is not much for people who are unlikely to find comparable jobs anywhere. Blue collar manufacturing workers are not in great demand these days.

GM is still trying to get its business right. That means its transformation from a bloated car company ,which once had 50% of the American automobile and light truck market and now has only 20%, is not over. It may never be. GM still faces withering competition from Ford Motor (NYSE: F) and imports from Japan, Korea, and Europe.

The GM layoffs are an echo of what the company had to do to survive. That involved the firings of hundreds of thousand of people since 2000. The layoffs do not come as fast now, but they are not over. Should GM continue to drop market share in America, the process of cutting the workforce would accelerate again.

Small layoffs are generally done because a company needs to become more efficient. An electrician here and there does not mean much, except to those who are let go. But, 3,000 people is a significant number for a company that only has 200,000 people left. Many of those workers are overseas, so the cuts are a not an insignificant part of GM’s American staff.

GM may look back at these 3,000 layoffs as one of the last legs of its US restructuring. That is not likely. Ford now sells nearly as many cars as GM does in U.S., and the same is true of Toyota Motor (NYSE: TM). Ford, by most standards, builds better cars and light trucks than GM. Toyota may put its recall problems behind it. The No.1 car company in the world still has a powerful brand. It has done enough with incentive programs and the launch of new vehicles, like the new generation Prius, to hold its own. Toyota has the balance sheet and product development skills to rekindle its American success.

GM still has a number of problems. The new layoffs are not the beginning of the end. They may only be the end of the beginning.

Douglas A. McIntyre