George S. May Business Blog

GM announces another round of layoffs, may collect more tax payer cash soon

With their scheduled February 17^th meeting date approaching, GM announced their plans to slash 10,000 salaried jobs in what seems to be another preemptive move to show Congress that they can become “viable”. In the announcement, GM revealed that they will be cutting 63,000 white collar workers, about 14 percent. Another 3,400 salaried employees will be eliminated by GM as well. GM also said that most remaining salaried employees will have their pay cut. GM estimated that by 2012 it plans to have cut its work force from 96,537 to around 70,000. The majority of these cuts are expected to take place May 1^st.

This seems to follow suit with GM’s trend for the 21^st century. Since 2000, GM’s salaried work force has diminished a ghastly 33 percent and their number of hourly workers has shriveled over 50%.

GM has received $9.4 billion from the Treasury Department and expects to get $4 billion more, but the government can demand repayment March 31 if it determines the company can’t become viable.

But will that happen? In my opinion, absolutely not. In fact, from my perspective it seems that the big three automakers, (GM, Ford and Chrysler) will undoubtedly receive more bailout cash. I can not believe that GM, Ford or Chrysler ever really thought they were going to have to pay this bailout money back. The timing of the buyout offers, the firings, the pay cuts, etc is just too incriminating. Think about it, the executive automakers scooted their little hybrids up to Capitol Hill in November to beg for money. Why was there a two month lapse before we heard all of the planned changes? Our newly appointed U.S. Secretary of Treasury Timothy Geithner revealed in an interview today that there is a definite possibility that tax payers will be digging back into their pockets for a second round of auto bailout cash:

“As you know on Feb 17^th we will see the initial outlines of the broad restructuring plans that these companies believe are necessary to get themselves on a path where they will be financially viable without government assistance. If there is a case to use public resources in support of that outcome and we can make a case to the American people in support of that outcome… then we will look very carefully at the best way to do that.”

I love the part: “and we can make a case to the American people”. He makes it seem like he will campaign to tax-payers on why GM needs cash and then we will ultimately decide by majority vote. I wonder, was that “case” made to the American people the first our cash was given to Detroit’s automakers? What about the money that went to the bank execs’ Christmas bonuses?

The way I see it, GM announced all of these firings and pay cuts today so that:

a) it will be fresh in the minds of the lawmakers on February 17^th

b) those announced changes won’t have time to take shape. Therefore if GM, Ford or Chrysler, continues to lay a financial ‘egg’, we won’t see those effects take shape until after their March 31^st deadline.

Related posts:

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