Fuzzy Math
So about a month ago, BIG NAME COMPANY laid off 100 workers from one of its plants here in town.
Of course, it was fairly big news and whatnot, as these things are. This is the plant where the engine for the BIG NAME VEHICLE COMPANY pickup is made, and I guess OTHER BIG NAME COMPANY said they would put a few week hold on making new trucks, meaning that the BIG NAME COMPANY plant didn’t have any orders for a few weeks, necessitating the layoffs.
When they did it, they said they were “hopeful” to hire them back in a few weeks when the orders resume. And sure enough, this week they were rehired. Well, 85 of them were anyway, as the other 15 must have found other jobs in the meantime.
Now, certainly I understand the logic. No orders = no revenue = no need for the workers. But laying off your workforce temporarily seems like a bad idea to me if you can avoid it.
So, let’s think about this. If we assume that the average worker here makes between $10-15 an hour, with benefits and whatnot let’s just say it’s $20 an hour. For a 40 hour week, * 4 weeks, * 100 workers, that comes to $320,000 saved by the company not having these folks work this week.
But let’s look at morale. Obviously if you are told you don’t have any work for 4 weeks, aren’t you going to start looking for a new job? If any of these people had any loyalty, it’s gone now. I bet quite a few of them aren’t working nearly as hard as they were before.
And what about that other 15? A new group had to be brought in to replace them, meaning that some new green employees who would need time to get up to speed on how everything worked and go through corporate training, etc, ad to be brought in. This, of course, takes money.
There wasn’t anything else these folks could do for a few weeks? Give them paint brushes and have them repaint the inside of the facility. Have them clean up the line. Have them clean up the grounds. Tell them to show up to one of the other 10 or so plants in town and do some cleaning there. Granted, these are union employees and there are probably union rules against this, but in the face of a 100 person layoff I bet the union would lax their rules. Tell anyone who DIDN’T want to participate that they could have the 4 weeks off unpaid. I bet you’d have a lot of volunteers that would stick around.
So on paper BIG NAME COMPANY saved $320,000, but I bet their total loss is MUCH higher. This is a classic example of a bean counter in a suit influencing a decision that really wasn’t all it was cracked up to be.
November 14th, 2007 at 1:02 am
as someone who worked in union auto plants for about 3 years, i am sure that they had no better option.
first off, depending on whether these guys are laborers or skilled tradesmen they make between $25 and $35 per hour PLUS benefits (sounds crazy, but it’s true). so you’re looking at more like $750,000.
secondly, you’re right that there are rules against the union workers doing jobs outside of their classification. maybe they could have struck a deal with the union, but that would take months. and even if you could work it out, all you’d get would be an electrician painting walls for $37/hour.
what you are suggesting is the way business SHOULD work, but unfortunately labor law (i.e. government regulation) prevents companies from acting in their own best interests.
November 15th, 2007 at 12:06 pm
obviuosly, caleb has worked at a small company too long.
one more point: what if chrysler didn’t decide to start placing more orders?
one additional point: cummins does not care one lick about it’s employees. it’s ALL about the bottom line.
November 16th, 2007 at 12:05 pm
don’t forget that you have to include insurance costs, unemployment insurance and other various HR costs that are included.
And as far as not caring about employees, if it wasn’t for cummins, they would never have jobs at all…….not to mention the money multiplier effect that goes into place…..
November 16th, 2007 at 12:38 pm
I wish 5 billions people could read this post.
November 19th, 2007 at 8:15 am
SIL2 is right. However, I have *some* experience with this, as SFIL works for GE in Btown and he gets “laid off” fairly regularly these days. Any time sales are down, they shut down the factory for a week. When you consider that everyone gets unemployment for every week they’re laid off except the first week, and the company has to make up part of the wages that unemployment doesn’t pay, then they probably are only saving roughly $20/hr/employee, if you figure a labor hour is around $100 with overhead and bene’s. but like everyone else said, it’s the bottom line that they’re looking out for. and these employees aren’t going to look for a new job if they’re told the layoff is only a few weeks. most will wait that few weeks and if it doesn’t look promising, then start looking, or at least start looking more agressively.