In a downward market, automobile majors downsize and restructure

The lead was set by General Motors, the world's largest automaker, which announced plans to cut 10 per cent of its North American workforce, or nearly 5,000 jobs. The company also announced that it would slash its automobile line-up, which includes abandoning entire engine programs and vehicle-building ‘architectures’. These moves are, it is expected, aimed at shocking GM’s complacent culture.

In keeping with its plans to reduce its current line-up of eight automobiles by at least 20 per cent, GM recently announced that it would phase out its 103-year-old Oldsmobile brand and cut more than 16,000 jobs worldwide. This move will also avoid hundreds of millions of dollars in costs.

The company is also looking to shift more engineering work to Mexico and take advantage of wages that are one-third of US levels. Following its footsteps, Ford Motor Company, the world’s second largest automobile company, announced its plans to reduce its European 50,000-strong workforce by 10 per cent a year.

This move comes in the wake of fears that Ford Europe could report losses to the tune of $1 billion in the region this fiscal year. Ford had already closed down its assembly plant at Dagenham, near London, relieving 1,350 workers of their jobs.

This retrenchment comes in the wake of recommendations made by consultants hired by Ford to review its competitiveness. The consultants’ findings reported that the company had 20-25 per cent more headcount than what is required, despite the fact that it has been in recent years reducing its workforce by nearly 6 per cent through natural wastage and retirement.

As part of the larger plan to get the European operations back into the black by 2002, the company is seeking a 20 per cent saving in its European logistics and transportation budget. It is also investing some $275 million in its Cologne plant to manufacture its new Fiesta model with newer and more efficient systems that are expected to cut the amount of labour required on the shopfloor.

At the other end of the spectrum, South Korea’s bankrupt Daewoo Motors announced job cuts that would affect nearly 5,300 factory jobs, as part of its restructuring efforts. While unions at the company have staunchly opposed this move, it is likely to accept the move in light of the fact that the company’s creditors have threatened to liquidate the company. Fresh infusion of funds as per a reform plan will not happen unless the company reduces its workforce. Any objections by the union to the job cuts might result in the closure of the company thus resulting in a total loss of all jobs.