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If you read Amy Goldstein's eloquent story about closing a car factory (Janesville), you'll know that it's a decision that has long-term human consequences. So, although I was not surprised that investors celebrated General Motors Co.'s announcement to close seven factories and reduce its workforce by 15%, the applause was still cold. Capitalism knows no compassion.
Eliminating jobs so soon after US taxpayers have prevented GM from sinking also seems ungrateful. The fact that GM has spent $ 25,000 million in dividends and share buybacks over the past five years does not really improve the situation.
Even in this case, there is probably something in the vision that it is about a necessary and proactive reduction of GM's production facilities to prepare for great challenges ahead. These include a slowdown in the US auto market, an increase in the cost of raw materials and the shift to electric vehicles requiring less labor.
GM would not receive thanks if he crossed his arms today just to ask for another ransom when the next recession comes, which will surely happen. As a result, senior management Mary Barra deserves credit for trying to reduce the point where GM reaches breakeven even though the economy is still under reasonable conditions. If only the same could be said of rival Ford Motor Co.
Ford announced earlier that it was virtually going to abandon auto production to focus on sport utility vehicles (SUVs) and more profitable trucks. The new boss, Jim Hackett, also discussed the idea of a $ 11 billion multi-year restructuring plan to deal with Ford's "ankle weights".
Until now, however, he gave very little detail on what this would imply, which left shareholders and limbo employees disappointed. The stock languishes at levels similar to those of 2009 and the dividend yield is 6%, which often indicates a reduction in distribution (Ford denies).
It is likely that much of Ford's reductions, when they are finally announced, are made overseas, with the United States representing the bulk of its benefits. GM has already been there and has done it. Barra has made deep cuts in emerging markets and has sold to Peugeot the activities of the European giant in Detroit in 2017.
Analysts at Evercore ISI describe Ford's approach as "much more extended, less detailed and lethargic". They have a point.
A press release issued Monday by Ford, summarizing his efforts for "business transformation," was more than a little defensive. Ford has not always been so poorly prepared. The painful restructuring begun in 2006, which included pledging the blue oval logo, prevented him from traveling to Washington when the recession occurred soon after.
To be clear, job cuts that change lives should not be rushed, should not be accelerated to appease shareholders who expect a short-term return. Unlike GM, Ford does not have to fear activist investors because the founding family controls 40% of the voting rights.
If Ford and Volkswagen AG can find an effective way to collaborate on future technologies or underperforming markets, it will be worthwhile to wait.
As always, however, a balance needs to be struck between worker protection and the financial health of the enterprise. GM has shown where its priorities are. A little determination from Barra could be beneficial for Ford.
By Chris Bryant
This column does not necessarily reflect the opinion of the editorial board or that of Bloomberg LP and its owners.
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