Capitalist tools for managing profits

There are a few tools for improving the bottom line, but the most common ones are: layoffs, outsourcing, offshoring and soon to be available automation with AI.

These are predominantly all ways of reducing headcounts in the shortest time possible. You might deploy new technology systems, innovate new products or negotiate major deals but I suspect these are unpredictable and quite possibly risky. Headcount reduction is the most easily understood option.

Historically popular form of cost cutting

I haven’t seen this in a way, but recently, one of the news article reported on an offshoring (or is it called outsourcing) deal to move manufacturing jobs from the Midwest (I believe Iowa) to Mexico. It’s been a while since I have read about one of those since the popular thing over the past few years was to in-source manufacturing to get around the inflationary costs and possibly the logistical jams coming out of the pandemic.

John Deere seems to be outsourcing/offshoring jobs and I’m kind of surprised. I was hoping that these manufacturers had learned that when you move jobs to other countries, you lose the engineering skills necessary to design new tools or products in a manufacturing environment. It’s one thing to do computer simulations and another to actually build a manufacturing facility and learn how to run it efficiently. Having a manufacturing building nearby becomes your playground to tinker around your ideas. By moving the facility to Mexico, engineers lose that playground.

This is disappointing.

Senior management says they need to cut costs because their profitability is taking a hit: instead of the previously projected net income of $7.5 to $7.75 billion, they will only make $7 billion.

Oh boo hoo!

A retired employee has said that John Deere is not hurting for cash:

“They’ve been in the wake of record profits for years now. In fact, last year, in 2023, they experienced $10 billion in profit. They spent $7.2 billion in stock buybacks, paid $1.4 billion in shared dividends, and awarded $26.7 million to CEO John May.”

Jing Pan, Moneywise, “‘Devastating’: Retired John Deere employee warns of ‘significant impacts’ of mass layoffs as the company moves manufacturing to Mexico, says the jobs ‘won’t be returning’”, 7/10/2024

New form of cost cutting

Technically, the way this next article reads, this is not really a cost cutting exercise, but a replacement of skill sets exercise. Intuit is laying off roughly 1800 employees to make room for engineering personnel with (reading between the lines here) AI skills.

But in the future, laying off people to be replaced by AI chatbots or tools could become the wave because the bottom-line effect will be very attractive to shareholders. At the next recession, the lure of using AI to replace people will be hard to ignore.

Anyway, for the topic at hand, my question is: why can’t the company train their employees instead? Or set aside funds for educational upskilling? They would retain institutional knowledge and layer over it with AI skills. At the same time, the company would build valuable skills in people development because that is going to be what we will be doing in the near future: constant upskilling.

Technology is changing faster and faster.

You can’t keep firing people to search for new people with new skills. The institutional knowledge and the collaboration skills will take a hit.

But no, they take the easy way out. It might end up being costly later on.