Why Did GM Cut Research and Development?

It’s already been pointed out in comments that GM has cut its advanced research and development staff by about a quarter. Most of the blogospheric commentary hasn’t noted that the cuts were divided roughly equally between GM’s R&D staff in Warren, Michigan and its R&D staff in India.

The company’s statement emphasizes a move towards a stronger orientation towards the customer:

Lauckner replaced Tom Stephens, who retired as GM’s chief technology officer. GM decided not to replace Alan Taub, former vice president of r&d , who worked under Stephens and retired last month. Lauckner has assumed Taub’s duties.

“These moves will enable the organization to better focus on commercializing customer-focused innovation in a more efficient and cost effective manner,” GM said in the statement.

Some of the changes are structural but don’t involve job cuts, a GM spokesman said. For example, about 60 r&d employees who are developing fuel cell technologies at a facility in Honeoye Falls, N.Y., now will report to GM’s powertrain division rather than its r&d division.

Let’s speculate a bit on why GM might have made this move. While I agree that U. S. auto industry management has been feckless and short-sighted, I don’t think it’s quite in the way that has been suggested in comments. I think that auto industry managers respond shrewdly to incentives and their incentives are perverse.

I don’t know how much GM increased its R&D staff to develop and produce the Volt. Now that the Volt is in (somewhat disappointing) production, GM may simply be cutting back on staff that’s no longer needed. Or it may be deciding to cut its losses on the Volt and this is the first baby step in that direction. Or GM may be doubling down on its bet on the Volt by moving R&D staff to the powertrain division. Now that would be feckless.

Maybe GM is trimming down, trying to boost short term stock prices. It might even be receiving pressure from the White House to do that in the hopes that the federal government can get out from under its investment in auto manufacturing as quickly as possible. If that’s the case, I would think that we should expect more cuts quickly.

Maybe GM is cutting down on staff-type functions attempting to make itself a more attractive acquisition candidate. Or, maybe, considering the cutback on Indian R&D staff, it’s turning more definitely to China. Since I believe that GM’s future is largely as an assembly shop for Chinese-manufactured components, moving more functions to China and trimming overhead functions in the U. S. makes sense.

Or, maybe GM has just decided that rent-seeking is cheaper than R&D. They should have a conviction rooted in experience that’s the case and that they can depend on Republican administrations and Democratic administrations alike for protection from creditors, competitors, everybody but themselves.

Update

One more point occurred to me. Don’t look at year-on-year sales. That really means very little to a business like GM other than as a sort of geiger counter. Look at the running five-year sales totals. GM is really a much smaller company than it was six, seven, eight years ago, probably getting even smaller, and it needs to trim staff to match.

2 comments… add one
  • Maybe they need to concentrate on making things on their long-known brands work.

    In 200o we bought a 1997 second hand Tahoe. We were renovating the house and renovating a condo at the coast. It’s been a great car. It’s towed trailers and toted all sorts of things.

    Recently, we bought a 2005 for such long trips as we take. It stands taller, has larger and more expensive tires, has a sight block over the right shoulder, and the speedometer went out when I was driving back and forth to Alexandria. The instrument cluster had a problem.

    Wind noise from the windshield at high speeds — posters at various websites say it ‘s because the windshield wasn’t sealed properly.

  • Siva Chander Link

    I don’t about the reasons for the layoffs at Warren. However, in the 10 years of its existence in India, GM ISL produced very little by way of relevant or substantive innovation to automobile engineering. A great deal of their work was in Formal Verification, which is a typical example of a bullshit research sinecure at universities worldwide, and utterly irrelevant to building a better vehicle. It’s a relief that GM did the right thing and shit-canned this sham immediately after Alan Taub retired. BTW, GM still has about 1600 direct employees at Bangalore doing real, if somewhat more menial, engineering work. The 90 employees who were laid off at ISL were given the option to shift to real engineering work, but very few had relevant skills.

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