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Auto Industry Cutbacks Spur White-Collar Talent Crunch

August 30, 2007
When former Home Depot head Robert Nardelli arrived in Auburn Hills, Michigan, on August 6 to take over as Chrysler’s CEO, he reiterated the company’s plan to cut 13,000 jobs as efficiently as possible.

The rapid cost cutting that permeates the auto industry in Detroit, where one in four industry jobs has been eliminated since 1999, has been justified by executives as a crude yet necessary short-term measure to make the domestic auto market solvent. The fallout, however, is creating a dramatic white-collar talent shortage among the Motor City’s Big Three auto¬makers, analysts say.

“We’re just seeing the beginning of a major talent crunch,” says Bradford Marion, senior client partner and leader for the automotive sector at consultancy Korn/Ferry International.

For example, there is Ford Motor Co., which announced plans last year to eliminate 30,000 hourly and salaried workers. Marion says it’s nearly impossible to do that without disrupting the company’s ability to cultivate and retain talented managers.

“It’s really hard to control whether you’ve picked the right 30,000 people,” Marion says. “As fast and with as many people involved [in losing their jobs], you’re not going to get it exactly right.”

As thousands of workers leave the auto industry, some of those gaps will be filled by outsiders like Nardelli, who joins the industry along with former Boeing executive vice president Alan Mulally, who now is CEO at Ford.

But with the future of the domestic industry unclear, attracting talented employees to positions that are not specific to the auto industry may be difficult. Marion said turnover was highest in finance, information technology, operations and supply chain management positions, as employees took the opportunity of a buyout to get into more stable industries.

“We typically don’t find people leaving their occupational areas,” says John Patricolo, an executive vice president at Right Management, an employment services company with offices in Detroit. Patricolo says the company has helped nearly 3,000 former white-collar Ford employees find new jobs in the past year. “Engineers will stay engineers. They just may go to aerospace or they may go to heavy-machine manufacturers.”

Patricolo says 74 percent of the white-collar employees his firm has helped find new jobs remain in southeast Michigan. Many go to automotive suppliers or to consulting firms.

Ford has long been a feeder company for other branches of the industry, a phenomenon brought home August 8 when Ford’s Mulally looked out at an industry conference of suppliers and said, “I think everybody is from Ford. They’re everywhere.”

One place where talented employees from Detroit automakers likely will not land is Toyota Motor Corp.

“We tend to promote from within, and that program hasn’t changed,” says Jim Lentz, an executive vice president at Toyota.

The Japanese automaker’s emphasis on its own automobile production process to cultivate managers, called the Toyota Way, is indicative of the cultural rift that separates the domestic carmakers from their Japanese rivals, observers say. Domestic carmakers have relied too heavily on people—as opposed to processes—to drive change and innovation in the industry.

“ ‘Process’ is not the culture of GM, Ford and Chrysler,” says Laurie Harbour-Felax, managing director at Stout Risisus Ross, a consultancy with offices in Detroit. “They are very people-dependent.”

As a result of the upheavals in the industry, domestic companies may face operational and developmental problems that could cost billions of dollars.
“There is a brain drain,” Harbour-Felax says, “and the people who have left have not transferred their knowledge to those who have stayed behind.”

Jeremy Smerd