GM Layoff Warning to Car Industry

By Douglas A. McIntyre Published Aug 20, 6:40AM EDT

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General Motors Co. (NYSE: GM | GM Price Prediction) layoffs seem benign, except to those people let go.
White-collar layoffs are often a sign that companies can do more with less, but also a sign of trouble.
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The General Motors Co. (NYSE: GM) layoffs seem benign, except to those people let go. These were white-collar workers, many of whom worked in software development, not people from the factory floor. GM and Ford Motor Co. (NYSE: F) said that, after their deals with the UAW, they would need to cut costs. In addition, the firings look like the management of GM believes it can run more efficiently.

According to CNBC, a GM spokesperson said in an emailed statement “As we build GM’s future, we must simplify for speed and excellence, make bold choices, and prioritize the investments that will have the greatest impact.” The statement means close to nothing.

Facing Reality

The car industry faces realities. The first is that the tens of billions of dollars paid to enter the electric vehicle (EV) business will not pay off, perhaps for years. Ford sells a few thousand EVs a month and still calls itself the number two EV company in the United States after Tesla Inc. (NASDAQ; TSLA). Nevertheless, earnings are undermined by losses in these EV operations.

GM and Ford cannot overcome the fact that EV sales are largely out of their control. The entire industry has slowed, and even Tesla’s sales have faltered. Consumers continue to worry about driving range, lack of chargers, and expensive EV prices.

The second reality is that the UAW has hurt the companies badly on the bottom line. Ford says the contract will cost it over $8 billion over its duration. Those are fixed costs that it cannot steer around.

White-collar layoffs are often a sign that companies can do more with less. They are also a sign of trouble.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.