Pretzel Logic

Another corporate drama is playing out on the great rust belt stage here in the Midwest. Five years ago, Ford Motor Company spun off its component parts business and formed Visteon. The logic at that time was simple enough. If the company’s parts plants had to compete on the open market, competitive pressures would drive performance improvements. They changed the structure, but the old culture never quite morphed into the new entrepreneurial, nimble entity they hoped to create. So, Ford buys back the Visteon plants. Once again, the US auto industry responds to change with its back to the wall. Visteon would have certainly filed bankruptcy without the bailout.

Here is where the logic gets twisted. In the course of a couple of weeks, they attack the cost problems by renegotiating the UAW agreement, cutting wages from $38/hour to $17. And yes, $38/hour does seem a bit ridiculous to me. Then they cut 850 white-collar workers. The remaining 8000 learned this week that their merit pay increases have been postponed indefinitely, and there would be no cost of living increases. Again, not paying merit makes some sense to me if they are working on a pay for performance basis. But then, they hire a new CEO, paying him at least $4.65 million the first year, including a $3 million signing bonus. That is where I lose the logic chain.

Weren’t most of the mistakes that crippled Visteon made at the strategic level? Why in the world would a company make workers at the execution level of the organization suffer huge financial cuts, while those at the strategic level get professional superstar athlete’s wages? Visteon will need the highest level of commitment possible from their workforce to succeed. Does anybody else have the sense that this logic will have a huge negative impact on morale, and a resulting decline in commitment?

Mike Neiss posted this on May 26, 2005, in Talent.
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