The General Motors CFO basically said as much on an investor call in 2022 or 2023. That didn't get rid of enough people, so now they've implemented stack ranking because that worked so well at MSFT. That said, they get a "free" 5% workforce reduction every year that they want it, no severance, no buyout, just let go. There will be more of that coming, particularly in US automotive after the UAW deal and the current sad state of vehicle sales and the write downs on EVs.
The sad state of vehicle sales has mostly to do with the outrageous increases in new car prices that go way beyond transmission of supply chain costs and dance right on in to price gouging territory. The prices still have not corrected to something sane according to the actual inflation curve.
The average price of a new car these days is $48K. This is insane. For that price tag to make any kind of sense at all, you have to have an income of nearly half a million per year. Median household income in the U.S. is around $75K meaning most of these households, if they're even purchasing a vehicle at all, would be buying used.
It would mean financial ruin to borrow two-thirds of your income for a car. The automakers have forgotten Henry Ford's lesson. He payed his workers enough so they could each afford the products he was selling. Our companies don't pay their employees enough to afford their products any more. <Surprised Pikachu!> Sales are down.
1000% agreed -- I worked for Ford and GM and now work for a different vehicle software company, and the salary I made starting out + the employee discount meant that vehicles were affordable, but not fun to afford. Now, I can't upgrade my F150 to something with more towing capacity and couldn't even while working at GM with their employee discount and somewhat lower truck prices in general compared to the other Big Three. The problem is corporate culture related, but it's also contributed to by the safety regs requiring every car to have a bunch of driver assist things that drive up total cost even on low end cars, meaning that the mid and high end need to be super profitable for overall fleet profit to be acceptable.
This comment laments about the rising prices of cars, but it doesn't offer anything to explain why they're getting more expensive.
"Greed" isn't the answer - we have greedy companies in every area of the economy, yet somehow the prices of phones, computers, desks, large appliances, televisions, and many other types of goods hasn't skyrocketed in the same way as cars.
What makes cars different? I know that the cost of labor has significantly increased (which partially motivates the stratospheric increases in education and healthcare costs), but I thought that cars were mostly manufactured in an automated manner.
Several things that aren't regularly talked about: to meet increasingly stringent emissions standards without massive losses in engine power (and resulting customer dissatisfaction), companies spend heavily on powertrain R&D to eke the remaining emissions improvements out (99.9% reduction to 99.99% reduction). To meet increasing safety standards, manufacturers have to have much more complicated base models than before, which drives up even the lowest car prices -- backup cameras, automatic emergency braking cameras and logic, immobilizer standards, etc. Then, for the products that everyone wants, some manufacturers aren't even making the new CAFE standards, so they buy "indulgences" (EV offset credits) from Tesla, which is literally a regulatory tax for the incorrect outcomes, but customers don't want GM and Ford EVs at the moment. Beyond that, some solutions to the above problems (hybrids) are simply insanely expensive (ballpark $20k extra manufacturing cost for a hybrid powertrain on some high end hybrid SUVs vs the identical engine without the electric components). All of that shifts parts of the curve to the right, some of it only shifts the high end, some of it shifts the entire curve.
Auto company profit margins provide further evidence supporting your hypothesis (modern car requirements are just inherently more expensive).
The auto companies whose profit margins I checked are in the single-digits, sometimes negative. If it was just greedy price gouging, we'd expect them to see much healthier profit margins.
I don't understand why people don't check these figures more often for these publicly traded companies when offering the 'companies are being greedy' narratives.
100% Agree, We could have $10k electric cars in the US, specifically made in China. It's not going to happen anytime soon for enough reasons that could fill a HN comment section.
What are the basics? The "front end" (demand side) is that cars are effectively subsidized by cheap and widely available financing, but at a high level where is that money actually going on the "back end" (supply side) that makes cars expensive to manufacture?
How is that average calculated though? If everyone switches from buying the $40k Camry to the $85k F150, prices didn't have to change for the "average price of a new car" to increase. This isn't a dismissal since we can compare every model year to the previous and see an increase YoY in prices without serious improvements to the underlying product. We have also seen everyone going from sedans to trucks though.
>It would mean financial ruin to borrow two-thirds of your income for a car. The automakers have forgotten Henry Ford's lesson. He payed his workers enough so they could each afford the products he was selling.
I agree but the problem is that business owners don't like how much money comes from that system and prefer competing for people's lines of credit, because an economy where everyone has $40k in debt literally has more money sloshing around it than one where everyone buys their car outright, and that means more profit, which is the entire goal of every CEO everywhere, so of course every CEO wants you to go into debt for them. Unfortunately, a lot of people can leverage themselves farther than they can actually afford for long enough that some CEO can extract profit before the entire system collapses.
A shitload of profit and CEO salary was made in the run up to 2008, and none of the people who extracted that wealth from the system went to jail, so why are we surprised they're trying to do it again?
Scientology managed to distill this down to the bones; They simply had people sign up for credit cards and max them out buying scientology stuff. Since the penalty for debt goes to the people who took it, instead of the place the money the debt went, there's infinite incentive to do this. CEOs look at that system and get extremely jealous.
> I agree but the problem is that business owners don't like how much money comes from that system and prefer competing for people's lines of credit, because an economy where everyone has $40k in debt literally has more money sloshing around it than one where everyone buys their car outright
It's even simpler than that, and "greed" doesn't come into the equation anywhere: any market where goods/services are subdized will lead to more expensive goods and services, by simple economics.
Even industries where companies are "good", and try to provide quality goods to customers at an affordable price point (while still turning a small profit) will see this happen, because the excess capital will push the apparent "affordable" point up - its effective, unwitting collusion for entire markets.
This is happening in healthcare (insurance that has transformed from being actual insurance in case of catastrophic injury, into cost-sharing), home prices (cheap mortgages), cars (cheap financing), and education (cheap student loans).
Debt needs to be more expensive. Insurance needs to only be for catastrophic events.
I listened to the entirety of the investor call and the GM CFO definitely does not call it a "free" workforce reduction.
The stack ranking is primarily about rewarding high-performing employees with higher bonuses. It also puts a low-performing employee at risk of getting let go, but it doesn't magically absolve GM of its unemployment law obligations, because any layoff pursuant to this planned workforce reduction would be grouped together and at GM's size the 5% reduction would trigger WARN Act obligations long before they got to 5%.
Seriously guys: if stack ranking were a magical way to avoid the WARN Act or other unemployment laws every company would be claiming that layoffs were performance based. That no company tries to claim performance as the basis for avoiding severance should tell you something about how the law works...
There is no entitlement in any country/state/province I've ever worked. You can quit at any time and your employer can fire you at any time - no reason needed either way
They have a new performance rating system that says that 5% of every team should be ranked as "needs improvement" meaning an automatic PIP. When MSFT did this in the 2000's, it was a requirement to fire that group. Firings for performance do not entitle an employee to severance, but official "layoffs" generally do outside of bankruptcy. Net cost of this move is hidden in employees spending time updating resumes and doing job interviews, not in direct bottom line dollars from actually paying out severance.
The other hidden cost is the paranoia and backstabbing that is encouraged when someone in every team has to be fired even if everyone did objectively excellent work.
What happens if stack rank->pip is too obvious is that people and teams will not cooperate with newer fresh meat. They're incentivized to keep knowledge protected for their job. New people struggle to get above the pip mark and it becomes a revolving door.
Firings for performance do not entitle an employee to severance,
This keeps getting repeated on this thread but its not true. U.S. WARN laws require severance or 60 days notice for mass layoffs (which would definitely include 5% of a company as large as GM). Only terminations for cause are exempted, and performance is only grounds for cause in a very small handful of "right to work" states.
No, my point is that it's irrelevant whether they're underperforming or not; what matters for WARN purposes is the amount of workers being laid off.
Only for-cause terminations are excluded the WARN Act, and for-cause in this context means specifically behavior that violates the law, or the employee handbook setting forth company rules (which are binding on both the company and employee, which is why companies make you read them every year). Also note that companies can't make poor performance a violation of company rules; this has been tried before and smacked down pretty harshly even in right-to-work states.
Thus, those 5% laid off due to stack ranking are entitled to 60 days of severance, or 60 days notice of an impending termination.
You're missing the part where the WARN Act doesn't require the employees to be let go all at once.
And the part where rolling layoffs at a company the size of GM will all involve multiple layoffs exceeding the WARN threshold.
And the part where no general counsel will let their company knowingly subject itself to a $500 daily fine per employee, in addition to full back pay for the mandated period.
And the part where GM satisfies its WARN obligations by paying the mandated severance (or more) in lieu of providing advance notice...which is what most companies do...
Which is exactly why they will try to bully you into quitting rather than fire you in jurisdictions with strong firing compensation/protection regulation.
Severance is a "we'll pay you to leave quietly" deal, not an entitlement. If the company plans to be continually laying people off (kind of a stupid idea because it makes your other employees nervous) they can find other ways to ensure silence from their victims.
perhaps this 5% is employees who were documented underperforming, breaking rules, getting into conflicts, gaming at work, etc. ehe company has every right to let them go without severance. usually referred to as "regretted attrition" which is ironic in this case because GM doesn't regret them leaving in the slightest.
Pitting your employees in a hunger games-esque charade is sure to have unintended consequences.
Surely, if I was an employee here, self-preservation would be of the utmost importance. If I fix something to make my job easier, I will keep it to myself. If I have the opportunity to sabotage a teammate, I would. If I can lie easily, I will.
And in my experience you run out of those individuals rather quickly and start cutting well-intended employees after only a few years. After that, you start firing hard working individuals who can’t or won’t play the game.
After that, you’re selecting for corporate psychopaths.
Not who you asked, but where I live, the law prescribes three levels of severance pay (one to three months of pay, depending on your time with the company) for all layoffs. Obviously not if you get fired.
