Sunday, February 25, 2007

GM cuts staffing agencies

Monday, February 19, 2007
GM cuts staffing agencies
The automaker will transfer work to fewer firms, putting others at risk of going under.
Sharon Terlep / The Detroit News

Dozens of companies that make their money providing contract workers to General Motors Corp. are becoming the latest casualties of the automaker's restructuring.

GM is eliminating 95 of 200 staffing companies located mostly in Metro Detroit that supply the automaker with workers ranging from secretaries to engineers.

GM wants to work with fewer contract staffing firms and weed out less efficient and redundant companies.

The most affected contract employees will continue to work for GM but will have to transfer to other companies. However, their employers are not only losing GM as a paying client, but also they are losing employees they hired and placed into jobs to their competitors.

The staffing firms say GM and Maryland-based Allegis Group, the company GM hired to manage its contract work force, are using their clout to poach workers and profits.

"CES has been supporting General Motors for 23 years," said Jay Miron, vice president of Computer and Engineering Services in Rochester Hills, which is losing 64 of its 300 employees in the shuffle. "I have friends in this business and, for some of them, it will close their company."

GM says it's treating the affected companies as fairly as possible as it moves to streamline its system for hiring contract workers.

For GM and other companies, contract labor provides flexibility in uncertain times. It allows the flexibility to bring in workers with key skills without adding them to the payroll permanently. It also offers the flexibility to downsize during slow periods without paying out expensive severance packages.

GM pays contract staffing firms, who in turn pay the workers' salary and benefits and retain a fee.

In recent years, Detroit's automakers and large suppliers have reduced their contract work forces by tens of thousands of workers, an often overlooked impact of the industry's downsizing.

Firms frustrated

Allegis Group, which was hired by GM in 2002 to consolidate the purchasing of its contract workers, recently sent letters to the 95 companies notifying them that their contracts will be terminated as of March 10.

The letters said GM-based employees will have the option of being reassigned to other temporary worker agencies.

"It has been determined redundancies exist in our supplier base capabilities within the program," said the letter from James Mann, Allegis' director of finance.

"In order to streamline operations and maximize efficiency and performance, it is necessary for us to reduce the number of redundant suppliers."

There's little argument that GM has the right to make the changes. Staffing firms seeking business with GM as part of the Contract Services Program, which Allegis oversees, must sign a contract that stipulates GM can hire their workers or transfer them to another company.

"It's a provision vendors agreed to," GM spokeswoman Brenda Rios said.

But several of the companies losing workers say they never expected GM to essentially hand their employees to rival contract agencies. Especially frustrating is that one of the companies gaining business with GM in the shakeout is Allegis-owned Aerotek Inc., which has several offices in Metro Detroit.

"It's like they're walking in and stealing these people," said Brian Baker, new business development manager at PlanTech Inc. in Farmington Hills.

He said 10 of PlanTech's 60 employees work for GM. "They're going to steal $750,000 of revenue out of my pocket.

"We had to agree to those contracts or we would have lost the business."

The president of another contracting company, who didn't want his name used because he's hoping GM will reverse its decision, said he's losing 15 of his 200 employees. Over the past several years, he said, he's lost about 100 employees to GM through Allegis.

"They're pretty much eliminating all of us and passing all the business over to their own company," he said of Allegis. "They're pretty much stepping on us and bullying us."

A spokesman from Aerotek referred inquiries from The Detroit News to GM, but maintained that Aerotek didn't receive any preferential treatment in the changes.

One worker from EDS who spoke to The News said some workers at the Plano, Texas-based company learned last week they would be transferred to Aerotek. The worker, who asked to remain anonymous, said employees are concerned because the benefits package at Aerotek isn't as generous as the one provided by EDS.

GM: No bias in decision

GM's Rios also said the automaker showed no preferential treatment to Allegis or Aerotek. She said the decision to reduce suppliers was based on several objective measurements, including the size of the companies, whether the services they provided were redundant and how well the companies measure up to performance standards set by GM.

While Allegis helped shape and measure those metrics, it was GM, not Allegis, that ultimately made the decision, she said.

"There was absolutely no bias in how we made our decision," Rios said.

GM said contract companies receive monthly updates showing how well they are performing against the standards. However, four companies that spoke to The News last week said they haven't received such an update for at least eight months.

The pain the companies are feeling is an unfortunate result of GM taking the necessary steps to cut costs so it can return to profitability, Rios said.

Working with a large number of contract houses requires more time and resources from GM, she said. And about half of the companies that are being cut have no workers positioned at GM, Rios said.

GM's move to scale back the number of companies makes sense, said Joseph Phillippi of AutoTrends Consulting in Short Hills, N.J.

"Those are the kinds of cost items that add up," he said. "They end up flying well below the radar in terms of areas of focus. But they can add up."

You can reach Sharon Terlep at (313) 223-4686 or

© Copyright 2007 The Detroit News. All rights reserved.


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