Question

American giant automobile manufacturer, General Motors (GM), recently announced their intention to lay off 4000 workers and implement other strategies in order to restructure their business operations.
a. What factors/conditions led General Motors to this decision to layoff in excess of 4000 workers?

Answer 1

FACTORS/CONDITIONS LED GENERAL MOTORS TO LAYOFF IN EXCESS OF 4000 WORKERS OR WE CAN SAY A MASS LAYOFF.

MOSTLY THE COMPANY DOES MASS LAYOFF BECAUSE OF SOME REASONS ARE AS FOLLOW:

1.The company is not selling enough units to justify the current number of workers.

2.A project or division is not profitable or not strategic for the company. It is cancelled and the workers laid off.

3.The company has accumulated a bunch of underperforming employees. It’s easier to fire them all in a layoff than through performance management. There’s less chance of a lawsuit or workplace violence.

4.The executives are trying to juice short term profits to pad their own stock-based compensation.

5.The workforce composition is wrong, there are too many people in one role and not enough in another.

GENERAL MOTORS TO LAYOFF IN EXCESS OF 4000 WORKERS.

General Motors has announced a lay-off for around 4000 salaried workers as a part of a reorganisation garnering a lot of criticism from the politicians of the US and Canada. These layoffs are a part of a cost-cutting plan that General Motors announced.

This, apparently, will save an amount of $6 billion in cost. But, General Motors has not given an estimate of the amount of how many workers would be involuntarily terminated as a result of the cuts.“These actions are necessary to secure the future of the company, including preserving thousands of jobs in the U.S. and globally.

The layoffs were triggered by a change in strategic direction. “We recognize the need to stay in front of the changing market conditions and customer preferences to position our company for long-term success,” the company announced.Layoffs sometimes mistakenly signal that a company is weak or injured.

Strategic decision for layoffs is to understand both the internal and external circumstances a company faces are as follow:

Market Dynamics(EXTERNAL FACTOR)

-Customer Preferences: Tesla has played a dramatic role in shifting customer preferences towards electric vehicles. When electric vehicles were first introduced, there were many reservations such as long-distance travel. But Tesla has eliminated many of those challenges, not to mention added cachet to electric cars. It has acted as a “forcing function,”. For other car makers like GENERAL MOTORS “sales of electric vehicles increasing from a record 1.1 million worldwide in 2017, to 11 million in 2025 and then surging to 30 million in 2030 as they become cheaper to make than internal combustion engine (ICE) cars.” It is also estimated that in 20 years, by 2040, electric vehicles will make up 55% of all new car sales.

-Competition:Competition, though, is not only coming from car makers. Uber and Lyft have changed the necessity of owning or needing a car. As a consultant, even in the most remote places, I no longer need to rent a car; there is always an Uber nearby. Driverless cars is another looming threat. While it hasn’t developed mass appeal, and there is still some weariness about the technology, it can’t be ignored. Both constitute unexpected threats to U.S. car makers.

Company Dynamics(INTERNAL FACTOR)

To remain competitive, car makers like GM have to address these shifting market dynamics. It’s a strategic choice to stop production of smaller cars like sedans and instead to prioritize cars that match customer preferences like electric vehicles and its popular SUV and crossover vehicles.

To do so effectively, it has to take the following actions:

Transform Product Development:Shifting product development efforts to focus on electric vehicles and autonomous driving technology.

Increase Capacity Utilization: Prioritizing plants that operate at full capacity. Operating plants that don’t operate at full capacity can bleed cash.

Staff Transformation: Enlisting the right skill sets for the products GM has prioritized.