As General Motors works through complicated and weighty labor issues, CEO Mary Barra has asked her employees to “assume goodness.”
It certainly seems fair to not assume ill intent. But in the interest of Occam’s razor, I’m more likely to assume a logical pursuit of survival. Is that the same goodness? For shareholders, perhaps, it’s a decent start.
GM’s decision to offer buyouts to most of its salaried employees in the U.S. sent shock waves through the industry, and especially the company. Some argued that its shifting position — from the assurance that no layoffs would be needed to the buyout offers that were underlined with a warning that involuntary cuts may need to follow — was a kind of betrayal.
Worse, even: It might signal a sudden and dramatic worsening of GM’s fortunes.
I don’t want to doubt the sincerity of Barra and her senior leadership team, but it sure feels like a move that is intended primarily for sending a signal or two to the agitated members of the UAW and Unifor who may be looking for big raises and expanded benefits in addition to massive investments toward the electric vehicle transition.
With the Consumer Price Index rising at rates of 6 percent or higher for more than a year, union members who received a 3 percent raise in 2022 are no doubt feeling the squeeze, despite record profit sharing payouts by GM and others.
The widening wealth gap has emboldened unionists in recent years, leading to organizing wins against the likes of Starbucks and Amazon.
Successful unions rely in part on public support, and according to the Gallup Poll, Americans’ approval of unions in general is the highest it has been since the 1960s.
Of course, the UAW is a special case, after a corruption scandal that sent two former presidents and several other union leaders to prison. In the first direct election of UAW leaders, about half of the executive board flipped to reform-minded candidates not endorsed by the previous leadership.
As of this writing, it isn’t clear whether Ray Curry will remain the UAW’s president or whether he will be ousted by Sean Fain. Presumably, Fain would be more confrontational with the automakers, but whoever is in charge is going to face incredibly challenging negotiations.
Workers are upset, and the companies have been putting up record profits powered by COVID-era vehicle scarcity. Most members probably expect a big payback.
But the automakers know that more normal production, inventory and pricing are coming. And they have to invest billions and billions of dollars to make EVs — and figure out how to make money on them, which most currently don’t. So they want to hold on to as much cash as possible to get across what Mark Wakefield of AlixPartners has called a “profit desert.”
And let’s not forget that many of the senior executives at the Detroit 3 were also executives during the Great Recession and the bankruptcies of GM and Chrysler. A major root cause of those bankruptcies were the massive obligations owed to union workers from contracts negotiated decades before. Barra, Ford Motor Co. CEO Jim Farley and other company leaders know that they could make mistakes in these negotiations that doom them to failure down the road.
If GM is aiming to soften up resistance among UAW leaders and members, the timing is just about perfect: Those who take the buyout offer will be gone by June, meaning that up to $1.8 billion in costs for the white-collar exits will hit the second-quarter earnings results, which should be announced right around the time of the handshake ceremonies that formally kick off the quadrennial negotiations.
Does GM have too many salaried workers? It is somewhat bizarre that the company employs more salaried workers in the U.S. than UAW members — and more than it did the last time it reduced white-collar headcount.
But I’m not inclined to think that GM was just hiring folks on autopilot. The company absolutely needed to go out and find people with the software, battery chemistry and other expertise that is essential for competing in the 21st century. And despite its plans to go all-electric in the next decade, it isn’t like the company is giving up on internal combustion engines. GM is actually investing to develop a sixth-generation small-block V-8 engine to power the big trucks that earn the big bucks needed to sustain the bottom line until EVs become sufficiently profitable.
Let me be clear: I don’t believe GM is doing anything evil. Buyout offers are just that — they give workers a fairly generous incentive to make a change in their employment status.
Does that make it an act of goodness? Not necessarily. But it may be a sign of smartness.