The tech layoff contagion is hitting automakers — but not like Google, Meta, Microsoft

General Motors CEO Mary Barra.
Nic Antaya / Stringer / Getty Images

Auto expert warns of a “generational layoff” in the car industry.
Silicon Valley may be taking a lesson from Detroit this time around.
The shift to electric vehicles will only spur more layoffs in the years ahead.

After avoiding the mass job cuts that hit the tech sector early this year, car companies are starting to make their own staffing rationalizations with buyout packages and waves of layoffs.

But the downsizing wave hitting the automotive industry isn’t quite the same as the one plaguing tech giants like Google, Meta, and Microsoft. 

Tech executives are blaming over-hiring, fake work, and other excesses of the economic boom of the last decade for their need to thin the ranks. The automotive industry, on the other hand, is going through a decades-long transition to electric vehicles that will make some jobs go extinct at the same time, it creates jobs that didn’t exist a few years ago.

General Motors last week announced a sweeping buyout program that will cover a majority of its salaried workforce in an attempt to “accelerate attrition” and save $2 billion in the transition to electric vehicles. GM’s buyout packages come after months of smaller layoff announcements from rivals Ford and Jeep-maker Stellantis.

Chris McCarthy, global transportation lead at management consulting firm North Highland, called these waves of downsizing in the auto industry a “generational layoff” that differs from what is happening in the tech world right now because some of these jobs are being replaced with new ones.

“We’re seeing layoffs in one area and growth in another,” McCarthy said. That’s compared to the downsizing in Silicon Valley where AI and other technology are making it easier to do more with fewer people, he said. “The auto industry still has a great need for employees with skills in software programming and engineering.” 

That will be a difficult equation to balance in the years ahead, Martin French, managing director at the consultancy Berylls, told Insider.

“If you look at the tens of billions earmarked for electrification and compare that to what these companies are actually making in the last few years, it just doesn’t add up,” French said. “I think this is just the first wave.”

Silicon Valley takes a lesson from Detroit

Layoffs and buyouts are nothing new to the automotive industry, especially in the last few years. Car companies outrunning the economic collapse of 2009 began their staff restructuring in good economic times, cutting tens of thousands of jobs in the boom years leading up to the pandemic.

In French’s view, the tech industry is taking a page from Detroit’s playbook as it trims its ranks this year. He’s skeptical of claims that tech companies are already victims of an economic downturn, and instead believes these companies are bracing for the worst before a true “bloodbath.”

“Is it really an economic downturn? Or is it that companies are just saying, you know, it’s just time to get a bit smarter and leaner?” French said. “Tech companies are taking the lead from what automotive companies have done in the past and trying to brace for that downturn before it really hits.”

GM underwent a global restructuring in 2019 that trimmed tens of thousands of jobs and closed factories across the country. Ford also cut some 7,000 jobs that same year as part of its shift to electrification. Both companies said at the time they were taking advantage of good economic times to make measured staffing reductions based on strategy.