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.

6 comments:

Chuck said...

Hurt or help Bob? Economists would say that overall this helps the economy in the long-run but the average blue-collar worker says it hurts. Maybe I'm wrong, help me out.

salty said...

Competition will help us in the long run. The U.S. car companies just need to step up.

Rex said...

There could be a big difference between if Ford buys out or fires their employees. If they choose the buy out it would tend to be older employees that are making larger amounts of money. If these employees were bought out, it could alleviate some burden of the company to hire lower waged employees. If they simply fire the workers then they are down sizing with no apparent thought of rehiring to fill those positions.

Eric said...

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.

Dr. Tufte said...

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.

Dr. Tufte said...

-1 on Eric's comment for a spelling error.