GM terminates hundreds of contract workers at tech center, other locations to cut costs

General Motors terminated “several hundred” contract employees who worked at its Global Technical Center in Warren as well as other locations this weekend in its bid to shave $2 billion from its budget by the end of next year.

The cuts come nearly a month after 5,000 salaried employees agreed to a voluntary separation package that GM said would help it achieve close to 50% of its cost-cutting target this year alone and prevent further involuntary cuts.

GM spokeswoman Maria Raynal confirmed to the Detroit Free Press on Monday that the automaker terminated “several hundred” contract workers Saturday, effective immediately. Most were full-time, she said. Raynal could not specify the other locations where people were terminated because contract employees are spread out across the organization.

“They’re in the global product development area in all different areas. It can be multiple different positions,” Raynal said. “It’s part of normal operations and it contributes to that saving, but we’re not sharing a specific number.”

The expectation is the cuts will be permanent.

Business expert Erik Gordon of the University of Michigan’s Ross School of Business said terminating contract employees is something many corporations do to save money.

“Contract workers are in an in-between land where they are not employees of the company, don’t get company benefits, and can’t count on long-term work,” said Gordon. “When contractors are let go, companies don’t think of it in terms of forcing them. They think of it as just not renewing work that always was temporary.  It’s a strained but common interpretation of ‘forced cuts’ or ‘job loss. ‘ “

Marick Masters, a business professor at Wayne State University, said more job cuts can be expected across GM’s workforce as the company funds its transition to all electric vehicles. That could be significant as GM will start negotiating a new contract with the UAW for its hourly workforce this summer.

“GM, like its other Detroit 3 competitors, struggles continually to realign its cost structure to shift from internal combustion to electrification,” Masters said. “This will require cuts in the salaried and hourly workforces, the contracted workforce, and the disposing of obsolete production assets as result of the shift.  This is not a stationary but rather a moving target, and these kinds of adjustments can be expected as a pace of transition accelerates.”

As the Free Press first reported in February, GM cut several hundred jobs from its global salaried workforce of 81,000 then. GM told employees in a memo that the cuts were based on performance, saying the company needs to have a top-tier team to execute its transition to all electric vehicles by 2035. About a week later, the Free Press was first to report GM offered the voluntary separation program to most global salaried workers, saying if it got enough takers it would prevent involuntary job cuts.