More CEOs Get Pre-Emptive About Layoffs And Cost-Cutting

There is probably only one person that could put President Donald Trump and newly-elected Congresswoman Rashida Tlaib on the same page after she infamously called him something profane and vowed to get him impeached.

That person is General Motors CEO Mary Barra.

The president and the newly elected representative from Dearborn, Michigan, objected vociferously to Barra’s decision in December to close five North American plants, including one in Detroit, as a way of curtailing production and battening down the hatches in preparation for the next downturn in auto sales. Trump jawboned Barra about eliminating American jobs, while Tlaib led a protest against local cuts at the Detroit auto show in January.

While maybe not making repeated national headlines, more CEOs these days are thinking and acting like Barra, moving to get their corporate houses in order at least in part as a pre-emptive strike against the potential likelihood of a slowdown in the U.S economy in coming months—or even an outright recession. Typically the moves have had an additional purpose, such as a step in strategic realignment, like GM’s elimination of most sedans.

Other CEOs recently moving pre-emptively have included Walgreens Boots Alliance chief Stefano Pessina, who announced a $1 billion cost-cutting program including layoffs from warehouse consolidations and store closures, even as the company reported a 10-percent increase in fourth quarter revenues. Pessina cited the need to get leaner and “increase our own pace of change” as change accelerates in its markets.

FedEx CEO Fred Smith launched a voluntary-buyout program for some U.S. workers, seeking to cut thousands of jobs after profits were dented by weakness in Europe and indigestion from acquiring European rival TNT Express. The move came not long after FedEx gave out raises and bonuses to hourly workers.

And Kellogg laid off 40 employees at its Rxbar unit, or about 20 percent of the staff, at the end of a strong year for the nutrition-bar brand that Kellogg acquired in 2017. The CPG giant appeared to be cutting costs at its highly successful acquisition to help out the parent company.

Craig Giffi, vice chairman and U.S. auto-industry leader for Deloitte, told Chief Executive that Barra’s move also reflects her efforts to get ahead of changing market dynamics.

“Independent of what’s happening in the economy, the record volume of cars coming off lease this year will depress new-car sales, and that will put a lot of pressure on profitability to the point where [automotive] CEOs will have to do something so they don’t end up in the dire straits of a decade ago,” he said.

But Ray Ziganto, founder and CEO of consultants Linara International, says moves such as GM’s and Rxbar are more strategic than tactical as they adjust to business opportunities Overall, he said, CEOs are still hiring about as many people as they can find. “Reducing head count is the last thing on anyone’s mind,” Ziganto said. “I’m still seeing hiring plans going forward, capital-equipment purchases going forward, and facility expansions going forward.”