Window Dressing for Wall Street

Despite the apocalyptic headlines, GM’s and Ford’s downsizing plans aren’t all that drastic.

It almost looks like they’re trying to fool Wall Street into believing these actions are tougher than they are.

Sure, 60,000 layoffs and two dozen plant closings sound bad. They are supposed to sound bad. But let’s take a more sober look at the numbers.

The attrition rate at GM and Ford is about 7% a year, meaning about 7% of the workforce retires, leaves or simply passes away every 12 months. GM employs 141,000 workers in the U.S. It says it will get rid of 30,000 of them in three years. Well, guess what? If the auto maker simply sits on its hands and doesn’t hire anyone, it will lose 29,000 people in that time frame.

Ford has about 122,000 employees in North America. It says it will slash about 30,000 of those jobs by 2012. Guess what? Through attrition, alone, it will lose 51,000 in that timeframe.

All the hourly people who are laid off by GM and Ford will end up in the Jobs Bank, where they will continue to get almost all of their wages and benefits until they retire. Then they will begin to collect their pensions. Not exactly hardship duty.

GM and Ford also negotiated health-care cutbacks with the United Auto Workers, but union members will not have to fork out monthly premiums or co-pay for any medicine. Sure, there are savings, but Wall Street quickly dubbed the concessions “more bark than bite.â€

The plant closings all involve facilities that are operating well under capacity. The surprise is not that they are closing, but that they have been kept open as long as they have. And that brings us to GM and Ford’s real strategy.

Each company is trying to tiptoe through the minefield of labor relations. They are afraid of the UAW. They are afraid of the growing dissident movement called Soldiers of Solidarity.

They are afraid if they push too hard the union will strike, and a prolonged strike could easily push either one into bankruptcy. So they are trying to orchestrate as soft a landing as possible, and praying that new products and pricing strategies will stabilize market share and cut losses. They will wait for a new UAW contract in 2007 to address the issues they have left untouched.

It’s not a bad strategy – if it works. But it relies heavily on hope. Hope for a strong U.S. economy, stable oil prices and no terrorist strikes. Hope that the new products are solid sellers. Hope that the Delphi bankruptcy will proceed smoothly. Hope there will be buyers for the ex-Visteon plants Ford took back.

That’s a lot of hope. One hiccup and GM and Ford will be forced to take truly drastic action.Â

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit†for WTVS-Channel 56, Detroit and Speed Channel.