GM Eats Its Children: Cuts Research And Development
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.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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"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...
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.
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.
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.