This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
4/05/2005
Ford to Fire
Ford Motor Company has decided to offer buyout packages to salaried employees in hopes it can retake about 1,000 jobs. The company has made this change in hopes of making their profit goals a reality. This move comes only days after the release of information that showed a very slow first quarter for the automobile industry and only a week after GM's announcement that it too may cut jobs and production. Domestic companies are facing extreme pressure from foreign automobile firms to improve quality and lower price. These pressures are leading to management decisions that may hurt the entire economy.
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3 comments:
I agree with salty and chuck in the long-run competition and trade will help the economy! So If Japan has a comparative advantage in Automobiles we should look other places to find where our comparative advantages lie.
This is interesting.
By not firing these people, Ford is acknowledging that they are worth the money they are being paid.
But, by offering them buyouts, Ford is acknowledging that the long-term costs of those employees are too high to be justified by their production.
These apparently contradictory points can only be reconciled if the latter situation also carries high risk. So what Ford is trying to do is reduce their future risk, in exchange for a current loss on those buyouts. Since most of that future risk is in health benefits, this doesn't speak well towards our ability to contain those costs.
-1 on Eric's comment for a spelling error.
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