FC NOW: The Fast Company Weblog
June 27, 2006
GM's Employee Buyout Offer
After the markets closed yesterday, General Motors announced that approximately 35,000 hourly workers have accepted buyouts to leave the company. The huge number was a surprise to both management and the union, indicating that the parties did an excellent job "pricing" the incentive earlier this year.
Three-way negotiations between GM, Delphi and the United Auto Workers last spring were contentious and intense, with each party threatening mutually assured destruction. Already in bankruptcy, Delphi said they might ask a judge to void the UAW contracts. In turn, the UAW threatened a strike against Delphi, which could effectively shut down General Motors by denying them the Delphi parts necessary to make Chevys and Buicks.
Behind all the rhetoric and posturing was what economists would identify as a shared interest: to "price" the buyout incentive high enough to shrink GM and Delphi without breaking the bank in the process. Somehow the buyout incentive would need to be attractive enough to get factory workers to give up a good-paying job, and the public noise about a GM bankruptcy would have to be loud enough to add some risk to the option of sticking with that job.
Industry watchers have suggested a variety of theories to explain the steady decline of GM. Some blame the labor contracts conceived in the 50's and 60's, while others blame a recent over-reliance on gas-guzzling SUV's. In my view, undesirable cars and trucks are the reason behind GM's dwindling market share; a steady stream of hit products could have sustained GM as a profitable company in spite of its large retiree health and pension costs.
Regardless, GM, Delphi and the UAW can share credit for a significant success today, collaborating in the design of an incentive that worked exactly as planned.
Posted by Greg Spotts at June 27, 2006 12:17 AM | Category: human resources |
5 Comments
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Your blog is very interesting, keep up the good works
Can the flashy, muscle bound tv campaigns of Dodge, Ford and Chevy save them? Uh ohs...the end of the american car revolution? Other than their prices, I dont think American brand vehicles can keep up with the competition. Honda and Toyota are already ahead of the hybrid scale which seems to be the popular thing now
As other industry observers have noted it's not the reliance on SUVs alone that is contributing to the problem. GM has massive duplication in it's model line amung GMC/Pontiac/Chevy/Saturn. GM should thin the ranks and re-focus the purpose of each of their nameplates. In addition, one thing struck me in some advertising... the LAYERS of functional employees. Do you really need a Denail Product Manager and Excutive VP of Product Marketing?
Your blog is trailblazing, keep up the good works.
Your blog is trailblazing, keep up the good works.