One Auto Company Practice That Needs Re-Thinking

I’ve been a pretty big supporter of the American auto companies, but one practice that they go through infuriates me, and I wouldn’t be surprised to see it go away.

What is it, you ask?

It’s the buyout packages that they give people to leave.

Depending on how long you’ve been there, someone can get a buyout package, on average, of $75,000 plus a $25,000 voucher for a new car.

While I appreciate the fact that they’re just not throwing people out on the street, I don’t agree with this practice for a couple of reasons:

  1. Very few, if any industries outside of the auto companies, offer such buyouts – A former co-worker at an old job recently got let go, and he got 10 weeks of severance. Nowhere near the amount, and he’d been with the company for quite some time. I think ‘industry standard’ of one week per year, plus maybe a couple of weeks, is fair.
  2. Now is not the time – The auto industry is already under enough scrutiny. I fear of an AIG type reaction if this became a major issue, and the American industry does not need any backlash or negative press.
  3. I feel it’s counterproductive – Quite honestly, the people most likely to take this type of offer, at least at first, are those who can more quickly find another job quickly. So, you lose the most talented people and you over-pay to do so.

I’m not heartless and I don’t ever want to see people lose their jobs, nor do I want to see people struggle. But, in the times of unprecedented struggles with the auto companies, I think that the strategy to reduce headcount has to be simple:

Find the people that are rated lowest, give them a decent severence, and move on. This keeps your better people who are more likely to lead a turnaround, as well as reducing the cost to downsize.