By on May 1, 2012

If you want to pretty-up the P&L of a car company, there are two quick fixes: You cut marketing expenses, or you cut R&D. A cut of R&D expenses won’t show up negatively for three to five years, when you suddenly lack new cars to sell. In the meantime, you look like a hero. General Motors plans to cut about a quarter of the workers at its R&D facility at the Warren Technical Center in suburban Detroit, Automotive News [sub] says.

According to the report, GM plans to lay off about one fourth of the roughly 400 R&D personnel at the Warren complex. 90 R&D workers at a GM research facility in India will also receive the pink slip, an Automotive News source said.

In a statement, GM confirmed a restructuring of its R&D department, but would not confirm the number of layoffs.

 

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55 Comments on “GM Eats Its Children: Cuts Research And Development...”


  • avatar
    Botswana

    *sigh*

    This is why I was against the bailout of GM. A company that gets itself into trouble needs to experience some pain in order to change its ways. GM took the money and was able to right itself, but seems doggedly insistent on making decisions that either score political points with their perceived government sponsors or seem to be business as usual.

    The real frustrating part? I want GM to succeed. Not just because my tax dollars are now invested in the company and I’d hate to see if go belly up, but because they have produced many vehicles that have entered into the records of automotive history.

    I wonder if any of this is related to that unfortunate battery explosion recently?

    • 0 avatar
      Robert.Walter

      Your statements are contradictory. What part of cutting 100 US development staff is designed to play well on the political circuit?

      • 0 avatar
        Botswana

        There was two parts to that statement, although it could be argued that cutting R&D is just a way to appear healthier in the short-term and thus making it seem like the taxpayer investment was justified.

        Really though, I see this as business as usual. Short-sighted planning which will hurt the company in the long-run. While it is cold comfort, this is hardly exceptional behavior for a lot of US businesses but does demonstrate that very little has changed at GM.

        I do hope they resume their R&D efforts in the near future. Surely things can’t be so bad that they’re going to suspend it indefinitely.

      • 0 avatar
        mike978

        I work in Pharmaceutical R&D so I know the value of R&D and long lead times. How many people work in GM R&D? How much does GM spend (as a % of revenue) on R&D and how does this compare to other major competitors?

        Before I condemn this I would want to know that. If GM is spending less or plans to spend less than the competition then this would be a stupid thing to do. Time will tell.

      • 0 avatar
        Motorhead10

        for FY2011, GM R&D was 5.41% of revenue – Here’s the list:
        Median 2.71%
        Average 4.94%

        Tesla 102.32%
        Audi 5.99%
        Honda 5.45%
        GM 5.41%
        BMW 5.25%
        Renault SA 4.76%
        Chongqing 4.57%
        Nissan 4.55%
        VW 4.52%
        Mazda 4.51%
        Isuzu 4.14%
        Suzuki 3.99%
        Daimler 3.92%
        Ford 3.89%
        Sanyang 3.89%
        Toyota 3.85%
        Kia 3.65%
        Jiangling 3.61%
        Peugeot 3.59%
        Hyundai 3.22%
        FIAT 2.3%

    • 0 avatar
      mikedt

      it probably has more to do with the executive bonus pay structure. Short term profits are rewarded now with bonuses. Long term problems are for the next guy to deal with. Since the current guy will have bailed via his golden parachute before the !@#! hits the fan.

      • 0 avatar
        Ron

        Wow, is this headline an overreaction.
        The 100 people cut at Warren reduced R&D by less than $20 million, a rounding error compared with the $7.0 billion GM spent on R&D in 2010 (2011 was higher, but I can’t find the number) and the $7.6 billion it earned. Also, R&D was 5.1% of GM’s revenue in 2010 compared with 3.9% at Ford and 3.8% at Toyota.

    • 0 avatar
      carlisimo

      I’m not convinced much of GM would’ve remained without the bailout.

      But maybe this action shows the link between GM and the government. Both are borrowing from the future to feed the past.

      • 0 avatar

        Now that the neutered, lobotomized, zombie is making record profits on the virtually same selection of crap, whats next for their new worldwide flagship? Cadillac? Really? They killed Saab everyway they could and are now realizing maybe Opel and Vauxhall aint going to cut it either.

        Im doing some R&D myself…ya know those little square GM badges on virtually everything…I think I could sell a sh!tload of rectangular ones that said FUGM.

  • avatar

    It IS in the company DNA after all.

    Damn. Felony stupid.

    • 0 avatar
      toxicroach

      Aren’t we jumping the gun?

      1) we don’t know who these workers are, except that they work at an R&D facility. Does that mean they are firing engineers, or are they cutting down on janitors, or irrelevant middle managers or what? Just because they work at an R&D facility doesn’t mean that they were doing R&D. We don’t even know what the people being let go do, so assuming that they are super critical the future of the company is an unjustified assumption.

      2) Even if they are engineers, perhaps they are the R&D people in charge of rebadging Chevy’s as Pontiacs or Buicks. If so, no great loss. I don’t see any particular reason to think they were necessarily making some important contribution to the company. It’s not like GM had a reputation for high efficiency or anything like that.

      • 0 avatar
        toplessFC3Sman

        Its engineers; I know a few people who were just cut over the past day or so. AFAIK, the all of the India R&D is being closed. And no, rebadging Chevys as Buicks is not R&D, thats marketing and product planning. R&D are the guys you (almost never) hear or heard about coming up with new battery chemistries, catalyst & engine control strategies, performing HCCI research, in-cylinder pressure measurement and working on stuff that won’t see the light of day for 5+ years.

      • 0 avatar
        toxicroach

        Well that answers that.

  • avatar
    michal1980

    wait. I thought we just were told the automotive world couldn’t find engineers?

    • 0 avatar
      aristurtle

      I guess it’s about to find another 500 or so.

      • 0 avatar
        toplessFC3Sman

        And R&D tends to be more specialized, with more degrees, than many places are looking for, especially foreign OEMs or suppliers that keep most if not all the R&D jobs in their home country, and rely on their US offices mainly for calibration, certification, and product “localization”.

    • 0 avatar
      redmondjp

      No, those R&D engineers cost way too much to hire.

      Companies want young, fresh faces who are excited about working on cars, for as little $ as possible. One automotive manufacturer that I worked for regularly had pizza parties and free T-shirt giveaways for their engineers (in lieu of any kind of regular pay raises). I was simply dumbfounded that most of the engineers didn’t see what was really going on.

  • avatar
    toplessFC3Sman

    I doubt it had much to do with the battery explosion, being that it is spread across multiple facilities and groups

  • avatar
    Educator(of teachers)Dan

    looks in GM’s general direction…

    Face palm.

  • avatar
    Conslaw

    The timing of this is unfortunate – right before another year’s crop of engineers graduates. These are folks who were told that they were getting into a field of great demand, and it ain’t necessarily so.

  • avatar
    KrisZ

    The sad part is that once GM needs those R&D jobs back, they’ll most likely go straight to China and/or Korea to fill in those positions.

    • 0 avatar
      Volts On Fire

      Most of GM’s ‘brain’power is already in Korea (Daewoo) and to a far lesser extent, Germany. Not a lot of talent left in the United States to begin with, and those who are give us crap like the 2014 Impala.

      In related news, today the U.S. took yet another small but meaningful step towards becoming a glorified banana republic. Nothing but UAW muscle, assembling cars designed offshore.

  • avatar
    lon888

    Nobody has ever accused GM of being TOO smart. A really dumb move by the ivory tower guys.

  • avatar
    icemilkcoffee

    Let’s not be hysterical here. Read the source article:

    “According to its 2011 annual report, GM spent $8.1 billion on r&d last year. …GM’s advanced r&d operation represents only a small portion of that $8.1 billion figure, he said.”

  • avatar
    Robert Schwartz

    If they shut down the electric car research, they would be saving not wasting money.

    • 0 avatar
      redmondjp

      Um, there’s not much to research besides the batteries. The AC motor/drive technology is pretty mature at this point with efficiencies already very high (way to the right, on the flat part of the diminishing returns curve) where only incremental gains are left to be had at great expense.

      The batteries are where the action is at, and where the research is still needed.

  • avatar
    seanx37

    I live in Warren. And know a few of those fired today. It is pathetic really. Exactly what the old GM would have done.

  • avatar
    Zackman

    Don’t do it, General. You’ll drive me back to Chrysler or go to Honda for my ride, or (gasp!) Toyota…maybe even Ford.

  • avatar
    FromaBuick6

    I thought the whole point of the bailout was to save jobs. If GM was really “saved,” like Biden’s been yammering on about lately, why the pink slips? When I was in the job market a year ago, Honda and almost every other manufacturer, even Chrysler was looking for lots of R&D talent, and now GM’s cutting 100 engineers?

    Either GM’s in worse shape than they want us to believe, or they’re once again displaying the Old GM shortsightedness and arrogance. Probably both.

  • avatar
    "scarey"

    Memo:
    The floggings will continue until morale improves.
    (signed)
    The Executive Comittee.

  • avatar
    doctor olds

    Shame on you playing to the weak minds!
    100 employees @$150,000 each =$15,000,000 or 0.019% of R&D Budget.
    100 out of 202,000 = 0.049% of GM’s 202,000 total employees.
    “Congress needs more people who know the difference between a million and a billion.”- John Sununu

    Apparently others have difficulty with proportion and order of magnitude. This change is quite trivial in the overall scheme of things.

    • 0 avatar
      Kevin Kluttz

      Tell those who GM laid off that it’s trivial. To them.

    • 0 avatar
      doctor olds

      @KKlutz- No doubt the individuals affected may not like losing their jobs, though GM is generous with severance packages and retirement provisions.

      My comments were not intended to trivialize the individual loss, only intended to illustrate the relative proportion of the the business involved. PCH101 brings it down to a more finite level, the Tech Ctr. itself. These cuts represent approximately 0.0% of the staff at that one site, hardly a sign of collapsing investment in R&D.

      While cutting 100 jobs in Michigan and 90 in Bangalore, GM has added 460+ in the China Tech Center. These numbers acknowledge the complexity of competing in the world’s largest car market where GM is “kickin’ ass”.

  • avatar
    Mr Nosy

    Or maybe,like Toyota (Who have also laid off some of their R&D staff.)they’re going to open up a sparkly new R&D facility in Chiner,too. That puts GM’s rationalization about intellectual property protections regarding the whole SAAB story more about eliminating a possible competitor in the Chinese SUV market.The next question is are these ex-staffers mostly in SUV R&D? If so,would they be eligible to apply for a job at the new Chinese facility? Perhaps at a lower wage,no seniority,but with a modest relocation stipend? I’m sure any unplanned staffing needs at the U.S. facility can be handled by of course,the temp…Ohh,ain’t that America!

  • avatar
    faygo

    the amount of money saved here is completely meaningless. the $150k/head figure (fully fringed) is probably about right, given that these are (one presumes) high seniority people with lots of degrees. it’s also not likely that there’s that much being spent by these people, unless they really spend a lot on whatever they’re doing.

    with minimal savings involved, this makes GM look even more mindblowingly f0cking stupid than they usually do.

    in the context of this situation “R&D” is _advanced_ research & development, so new technology which is far beyond what’s being implemented in production programs. depending on what GM’s cycle plan is for new technology, they may be counting on suppliers to develop things for them or making an overt move to not be as competitive, which is sort of sad.

  • avatar
    carbiz

    …. and yet 34 posts have been consumed beating what is essentially a dead horse to death. However, the uninitiated will walk away with the impression that a) GM is falling behind the competition in R&D spending, B) once again, Japan Inc spends more and is superior, C) GM is short sighted, has not learned a thing from bankruptcy and should have been allowed to die 3 years ago.
    Bankruptcy does not occur in a vacuum. It takes the concerted effort of many people with axes that need sharpening…..
    (Make that 35 posts…)

  • avatar
    Kevin Kluttz

    GM has engineers? Could have fooled me.

  • avatar
    GS650G

    How about they axe the golden parachutes and retirements for the previous senior leaders, that should save a few engineer jobs.

  • avatar
    obruni

    GM trims R&D = outrage

    Toyota trims R&D = *crickets chirping*

    nice to see TTAC’s user base still suffers from General Motors Derangement Syndrome.

    • 0 avatar

      Can you provide links to Toyota cutting r&d?

      • 0 avatar
        Mr Nosy

        I could be screaming Abner!Abner!I saw it!I saw it! A la Mrs.Kravitz,on this one.However Toyota monitoreth the Go,Ogle,et al.,and it scrubbeth it away. Although it’s still is alluded to in the WSJ 4/10/12 about Toyota restructuring its R&D.Next time I’ll “bookmark this page”. Now,if ya don’t mind,Sammy,I’m late for a compare and contrast on set design between this season’s MADMEN,and the first season of Bewitched,in color….Oh look-Hi Cottontop!

      • 0 avatar
        obruni

        Toyota cut by 5.7% in 2009

        http://www.toyota-global.com/investors/ir_library/annual/pdf/2009/pdf/p34_35.pdf

        It was cut again by 19.7% in 2010

        http://www.toyota-global.com/investors/ir_library/annual/pdf/2010/pdf/p18_19.pdf

  • avatar
    Pch101

    “If you want to pretty-up the P&L of a car company, there are two quick fixes: You cut marketing expenses, or you cut R&D.”

    Do the math: Cutting 100 jobs isn’t going to do much of anything for the P&L.

    According to the Automotive News story:

    “GM will lay off about 100 of the roughly 400 workers at its advanced r&d unit housed in the sprawling Warren Technical Center in suburban Detroit, which employs some 16,000 workers in everything from engineering to design. The advanced r&d operation focuses on technologies such as fuel cell development and is a small component of the Warren complex.”

    So it sounds as if GM is cutting some engineers who work on “moon shot” development projects. That could include guys who work on stuff such as the Volt, a car which TTAC is known for strongly supporting (cough, cough, hack, hack.)

  • avatar
    Robbie

    This may not all be that bad… I would expect that GM does most of its R&D in Germany and Korea, and limits its Detroit research in scope and scale. The US car market is relatively small compared to the rest of the world, and requires pretty specific vehicles. The trend is also towards filling the US market with more and more vehicles that are to a large degree derivative of rest-of-the-world cars.

    • 0 avatar
      faygo

      you’re missing the point. and everyone from Bertel’s story forward seems to be making the same mistake.

      “R&D” in the context of this story is non-vehicle specific technology/innovation/etc work. it’s not doing the next Cruze’s front suspension or the next Buick’s interior trim. it’s developing some new thing none of us have even thought of or can imagine. if GM is cutting that sort of basic R&D, they’re walking away from innovating new technology, which isn’t a good thing.

      however, from the outside looking in, it’s hard for any of us to know exactly what those people were doing. whatever they were doing, it doesn’t look good on many levels :
      are these pure science people with no ability to do vehicle-related tasks ? this means GM was wasting money on pie-in-the-sky things which someone has finally decided have no potential application to vehicles.

      are they just dead weight which somehow escaped prior cuts due to the nature of their work ? this means GM had some sort of over-strong chimney structure which meant that elsewhere in the company, qualified/non-dead wood were let go in the past while pure research types who weren’t contributing were kept on board.

      is GM unable to recognize that these people have value elsewhere in the engineering organization ? if they aren’t dead wood, their organization should be flexible enough to find them work elsewhere.

  • avatar
    Lampredi

    “A cut of R&D expenses won’t show up negatively for three to five years, when you suddenly lack new cars to sell. In the meantime, you look like a hero.”

    Sounds like Sergio Marchionne’s tenure at Fiat…

  • avatar
    Crosley

    This is why I was against the bailouts, every decision by GM has been and will be about the reelection of a certain politician in November.

    Not about making the best cars or creating a profitable enterprise that can stand on it’s own two feet. It’s just a tool for politicians.

  • avatar

    The fact that GM is cutting funding for basic research is not surprising. Even companies like DuPont and Pfizer, which depend on basic research, have cut back on r&d that can’t be applied to existing product development. I think it’s shortsighted but it’s a fact of life in the corporate world.

    Back in the 1950s and 1960s it became a bit of a status symbol for companies to have basic research departments. That’s how Jack Goldman, who later founded the Xerox PARC lab, came to run Ford Scientific Laboratories. Sometimes those basic research departments would come up with something useful, but most of the time it was pursuit of knowledge stuff.

    Like I said, I think basic r&d is important but cutting that isn’t going to affect short and mid term product development.

    Based on what I saw at the SAE World Congress, the engineers laid off at the Tech Center, shouldn’t have too much trouble finding another position. There’s some irony in the fact that GM right now probably has well more than 100 open engineering jobs.

  • avatar
    alluster

    Layoffs are never good. It looks like GM is giving them 30 days to find jobs in other divisions. Right after college I worked for IBM R&D but within 2 years they cut their R&D budget and moved a few of us to Global Services, assuring we could move back in the future. 5 years on my priorities changed and I no longer care. A job is a job.

    Lately some of GMs actions are boneheaded. Why call to attention layoffs at a time when everyone is looking at them with much scrutiny. With so much criticism about the bailout and its job saving intentions, why layoff employees, that too in a an election year? Why did they want to suspend Volt production or at least announce it when there is so much negative propaganda about the car enforcing people’s perceptions that it is a failure? Bad move GM. Should have just reassigned these engineers to other open positions. Its all about image. People are not gong to buy a product if they know its not selling very well nor are they going to trust products made by a company that has cut research and development, however negligible the effect is on actual products.


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