Engineers' work goes overseas, GM says

[Globalist]

http://www.freep.com/apps/pbcs.dll/a...=2006604060556

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Engineers' work goes overseas, GM says
Next cuts in Mich. set for this month

April 6, 2006

Email this Print this BY MICHAEL ELLIS

FREE PRESS BUSINESS WRITER




Jim Queen, GM vice president of global engineering

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• What do you think about moving engineering jobs abroad? Write your comment and read what others have to say.

GM job cuts so far

• 30,000 hourly layoffs and closure of 12 plants, warehouses by 2008, announced Nov. 21.

• 113,000 hourly buyouts offered -- to entire U.S. workforce -- on March 22.



• Hundreds of white-collar dismissals handed out at the Warren Tech Center and elsewhere on March 28.



Plus more to come



• More engineering cuts to be announced this month.
General Motors Corp. will cut its engineering staff in Michigan for a second time later this month as it continues to shift some work to emerging markets such as Brazil, where GM is hiring engineers to develop the next-generation small pickup.

The job cuts, following last week's forced layoffs of hundreds of GM white-collar workers, will be the last round for the engineering department, and Michigan will continue to be home of GM's largest engineering center, a top GM official said Wednesday.

"North America is still huge. By far, it's our largest center, and it will continue to be our largest engineering center," Jim Queen, GM vice president of global engineering, told the Free Press.

"It's just that we're going through a difficult business period right now and it's getting right-sized."

Queen and a GM spokesman declined to say how many engineers, technicians and others would lose their jobs in the next round.

GM officials did not specify how many white-collar workers lost their jobs in last week's cuts, other than to say it was less than 500.

GM's engineering department employs 22,000 worldwide, with most clustered in 12 engineering centers.

Last week's U.S. job cuts were aimed primarily at GM's Tech Center campus in Warren, but they also affected about 30 other facilities in the United States. They follow one of the worst years in the automaker's history.

GM lost $10.6 billion in 2005 because of declining U.S. vehicle sales and rising costs, which spurred many analysts to conclude that the automaker could be forced into bankruptcy unless it turns the corner.

GM's U.S. sales have continued to falter this year.

On Wednesday, GM told workers at its Lordstown, Ohio, assembly plant that it will cut a third shift of workers sometime this summer because of forecasts of weaker sales of the Chevrolet Cobalt small car built there.

Production of the small cars will be cut to 1,000 a day from about 1,300 a day currently, spokesman Dan Flores said.

GM employs 6,000 workers at the Lordstown car assembly and metal-stamping plants.

An unknown number of workers will be affected by the downsizing because GM has offered all of its 113,000 U.S. hourly workers early retirement or buyout packages.

Therefore, the number of workers at plants like Lordstown is expected to fall, anyway.

Emerging markets

GM's cuts last week to its engineering staff stem not just from cost-cutting efforts, but from continued efforts to rely more on its far-flung engineering centers in emerging markets, where wages are lower. These centers have grown in recent years with the addition of GM Daewoo in Korea and new engineering expertise in China.

"There's significant emerging markets elsewhere in the world where we're going to be adding resources, and we're going to be adding to it this year," Queen said.

GM is close to announcing that it will codevelop the new pickup trucks in Brazil with Isuzu Motors Ltd., Queen said.

GM will again work with Isuzu despite disappointing sales for the current pickup, which was also codeveloped with Isuzu. In addition, GM confirmed last month that it is in talks to sell its 7.9% stake in the Japanese automaker.

Over the last six months, GM has sold its most of its stake in Japan's Suzuki Motor Corp. and all of its shares in the parent company of Japanese automaker Subaru.

But GM will continue to work with Suzuki and Isuzu to develop vehicles in an effort to cut costs, Queen said.

GM will add some engineers in Brazil for the small pickup truck program, Queen said.

Before that program starts, they will also work with Europe on developing the next-generation small- and midsize cars like the Chevrolet Cobalt, Saab 9-3 and Opel Astra.

Asia expands, too

GM also is adding jobs in India.

The automaker has posted want ads on its Web site for several jobs at its recently established research and development lab in Bangalore, India, including positions such as research engineers and senior statisticians.

GM also has notified professors at Wayne State University's College of Engineering, asking whether any Indian nationals earning a degree are interested in the positions.

India already does much of the design for automotive parts and components for many vehicles engineered elsewhere around the world, Queen said.

Despite growing engineering work in emerging markets, North America will remain the center for developing large pickups, SUVs, small crossovers and rear-wheel-drive luxury cars, Queen said.

By making one of GM's engineering centers responsible for a particular type of vehicle, the automaker can eliminate overlap and cut costs.

For example, GM used to develop five different types of midsize cars. But now, all the midsize cars share a similar set of components referred to as the Epsilon architecture.

That focus will allow GM to "do more with less," Queen said.

"That's exactly what we want and what we need to have if we're going to survive as a company."

Contact MICHAEL ELLIS at 313-222-8784 or mellis@freepress.com.

[Globalist]

Engineering is an international engine. And India and China do offer a cheap brainpower. Use it or lose it to others.

[DuSpinnst]

Someone said in one of my business classes that the salaries in India for Engineering are increasing at an alarming rate... (like they did in the 90's here in Detroit) Anyone got figures, and I wonder how that will effect the "cheapness" of India.

[FunkyPig]

Also it makes sense to have the engineering centers where the big markets are, China will be massive and so will India further into the future, get in there now and establish yourself GM. Smart move.

[bone]

Not against the move,however,have you seen how ugly Indian vehicles are? Lets make sure design jobs are not shifted overseas.

[69Firebird400]

Originally Posted by DuSpinnst

Someone said in one of my business classes that the salaries in India for Engineering are increasing at an alarming rate... (like they did in the 90's here in Detroit) Anyone got figures, and I wonder how that will effect the "cheapness" of India.

One source of hope that I have for the developing countries' competitiveness with the US is that as the demand grows and grows for their human resources - particularly skilled labor - their salaries will increase, eliminating more and more of their cost advantage. The only problem is, we're probably losing jobs faster than India's and China's pay scales are catching up to ours, but at some point, the cost advantages of Indian or Chinese labor are going to become so small that it may not be worth it to outsource to those countries. I just don't know when that will happen - 15 years? 50 years?

[D C]

Originally Posted by Globalist

"It's just that we're going through a difficult business period right now and it's getting right-sized."


"There's significant emerging markets elsewhere in the world where we're going to be adding resources, and we're going to be adding to it this year," Queen said.


GM will add some engineers in Brazil for the small pickup truck program, Queen said.


GM also is adding jobs in India.

So which is it? Are you "right sizing"? (a management phrase that should be a felony to use) or are you just shifting work away from the talented, experienced people you have in the US to other areas where you can pay them a third less? Oh, nevermind that those people have no experience and no practical no clue how to engineer a car. That doesn't matter. An engineer is an engineer. Why do I have a feeling that much of what GM has learned about quality design and engineering is going to be lost. I don't see this ending well.

[D C]

Originally Posted by 69Firebird400

the cost advantages of Indian or Chinese labor are going to become so small that it may not be worth it to outsource to those countries. I just don't know when that will happen - 15 years? 50 years?

Is it really worth it now?

[momo67]

Originally Posted by DuSpinnst

Someone said in one of my business classes that the salaries in India for Engineering are increasing at an alarming rate... (like they did in the 90's here in Detroit) Anyone got figures, and I wonder how that will effect the "cheapness" of India.

I don't have the numbers in $ or Rupees, but the top talent in India and China jump from one Western company to another and get a 10% raise each time. But since they're starting from such a low base, like 1/10th of a US salary, it'll be a long time before anyone decides that it's too expensive to outsource US engineering jobs. Plus the fact that they just produce a lot more engineers than we do so there's an almost limitless pool of talent to choose from. Microsoft tested and interviewed thousands of people for their tech center and only picked the top 1%. Survival of the fittest baby!

[ScottS]

That's it, keep taking away more reasons to buy "American" brands....

[Whirling_Dervish]

Originally Posted by DuSpinnst

Someone said in one of my business classes that the salaries in India for Engineering are increasing at an alarming rate... (like they did in the 90's here in Detroit) Anyone got figures, and I wonder how that will effect the "cheapness" of India.

Eventually they'll be at parity and it will no longer be cheaper or more convenient to outsource.

[tgagneguam]

It's funny how Asian automakers are opening up design and engineering facilities in the US, and they're breaking ground on new plants in North America, too. I wonder if they haven't heard of the cost advantage of shipping jobs to China and India.

(Of course, I say this in jest).

[nadepalma]

Originally Posted by 69Firebird400

One source of hope that I have for the developing countries' competitiveness with the US is that as the demand grows and grows for their human resources - particularly skilled labor - their salaries will increase, eliminating more and more of their cost advantage. The only problem is, we're probably losing jobs faster than India's and China's pay scales are catching up to ours, but at some point, the cost advantages of Indian or Chinese labor are going to become so small that it may not be worth it to outsource to those countries. I just don't know when that will happen - 15 years? 50 years?

This is a very good point. And it will probably happen at an alarming rate as their economies grow. You're right, who knows when that will happen. But we can look to our neighbors to the south for some answers. I've read that automotive investment (by OEMs, etc) in Mexico has slowed -- to some degree b/c the market has ballooned so quickly during the 1990s that its no longer cost effective to outsource to Mexico when China, Vietnam, or India are more attractive. Now Mexico is growing a middle class that can afford goods and products at a higher rate than 15 years ago (thanks in part to direct American invest to our southern cousins) -- so who's to say the very same won't happen 10 years down the road with China and India?

Also, consider the curency game. I've been harping on this for some time (others as well). Part of what makes China so attractive is the favorable exchange rates. But China does not let their currency float on the open market, they peg it at a ratio to keep their good cheap. Japan plays this game too, but actually on the market by depressing the value of their currency through purchases, etc. At least the Japanese let it float and then their banks play the gam in the market. Point is that China and others that play this game are making themselves seem more attractive than they really are. If their currency were ever allowed to float, they'd lose some of their cost advantages.

Just my two cents... good post 69Firebird400!

[PRO_USA1776]

The reason the Kora-nese are opening centers in America is because they want more market share. I was wondering if they could maybe open their markets to American cars?

As far as engineering jobs going overseas, none of this would be happening if Americans hadn't atarted buying Japanese cars in the 1970s. So for those that are cheering the demise of GM and Ford, I ask you, who is going to buy the product you sell?

[Whirling_Dervish]

Originally Posted by tgagneguam

It's funny how Asian automakers are opening up design and engineering facilities in the US, and they're breaking ground on new plants in North America, too. I wonder if they haven't heard of the cost advantage of shipping jobs to China and India.

(Of course, I say this in jest).

When volumes are high, build local-sell local is good business.