General Motors is offering buyouts to salaried workers in an effort to accelerate the cost-cutting efforts announced in its 2022 earnings report. The company has not announced how many employees it wants to shed. Its immediate intent is to eliminate $2 billion in operating costs from its balance sheet as it works toward its intended goal of transitioning from internal-combustion to EVs by 2035, according to AP reports.
“As part of our plan to accelerate attrition and achieve $2 billion in cost savings by the end of 2024, General Motors is announcing a Voluntary Separation Program for all U.S. salaried employees with at least five years of service and all global executives with at least two years of service,” GM spokesperson Maria Raynal told Autoblog in an emailed statement. “This voluntary program offers eligible employees an opportunity to make a career change or retire earlier. We are offering three packages based on level and service to the company. Employees are strongly encouraged to consider the program.”
“By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market,” Raynal said.
GM extended the offer to U.S. salaried employees and some global executives. U.S. workers with at least five years’ tenure were offered a month’s pay for each year of service (capped at one year) along with interim health coverage and a partial payout of bonuses due for 2022. Global executives with at least two years of service were offered their base salary, applicable incentives and interim health coverage. All employees who were offered a buyout are eligible for outplacement services.
The deadline for employees to accept the package is March 24 and those who take the buyout will have to exit the company by the end of the second quarter (June 30).
In a call with reporters that followed its January earnings announcement, GM Chief Financial Officer Paul Jacobson said the company’s position was strong enough that it expected to avoid layoffs. Instead, the company would rely on limiting hiring and fill only strategically important roles as they become vacant through natural attrition, which has evidently proved insufficient thus far.
Economic Concerns
General Motors (GM) is offering buyouts to most of its salaried workers as it strives to reduce expenses by $2 billion over two years. This ambitious cost cutting initiative by a major company comes as US layoffs hit an eight-year high.
General Motors (GM) recently unveiled a cost-saving initiative that includes simplifying vehicle operations and sharing components between gas-powered cars and future electric models. Furthermore, GM stated that discretionary spending must be reduced while growth initiatives prioritized in order to accelerate benefits accruals.
General Motors (GM) is transitioning away from traditional combustion engine platforms to an electric drive system powered by batteries, necessitating them to rethink their entire business model. They must cut costs as they attempt to stay profitable amid persistent inflation that could slow car sales growth.
On Thursday, General Motors CEO Mary Barra sent employees a memo outlining the new program. Employees have until March 24 to select either an equity buyout or separation package and must depart June 30.
A General Motors spokesperson described the package as a “vast and comprehensive severance solution”, featuring one month’s pay for every year of service up to 12 months, prorated performance bonus, interim health coverage and outplacement services. This is GM’s most comprehensive employee retention and compensation plan in over ten years.
This program is intended to accelerate the attrition process by providing employees with a voluntary severance option, also referred to as GM’s “voluntary severance program.” However, there will be an associated pre-tax charge of $1.5 billion which includes both cash-based charges and non-cash pension curtailment costs.
Electric Vehicles
General Motors has introduced a significant buyout program that affects most of their salaried workforce as the company continues to reduce expenses. Employees who sign up for this voluntary package will receive one month pay, incentives, COBRA health coverage and outplacement services. GM CEO Mary Barra sent out a letter on Thursday informing workers that those approved for buyouts can leave by June 30.
The move is intended to save $2 billion in fixed costs over the next two years, helping automaker finance an electric future. These costs include reductions to vehicle complexity, expanding shared subsystems between electric cars and gas-powered cars, as well as more focus on curbing discretionary spending.
Dealers may incur costs beyond just purchasing electric vehicles to modernize showrooms for charging stations and specialized tools. Renovation of these facilities can run up to $300,000 and may need to be repainted or insulated in order to accommodate the charging equipment.
Dealers may need to upgrade the way they hire and train employees, as EVs require a different skill set than gas-powered vehicles. Many EVs feature complex control systems that must receive data from other components and execute instructions quickly – necessitating high levels of computer literacy from many workers, such as service technicians and salespeople.
It remains uncertain how many dealers will accept buyout offers from General Motors, but the number is expected to be much smaller than the number that accepted similar offers from Cadillac in 2020. According to Michelle Malcho, GM spokesperson, only 320 of the 880 merchants who received those offers accepted them rather than expecting they must spend at least $200,000 upgrading their dealerships for electric vehicles (EVs), according to CNBC’s recent interview with her.
Malcho noted that some Buick dealers selling GMC or Cadillac models have already invested in chargers and other EV-related equipment, but General Motors expects them to spend more money in the future to meet EV requirements. Furthermore, GM plans on mandating retailers hire and train more salespeople who can support electric car sales, she noted.
Layoffs
General Motors has launched a voluntary buyout program to expedite its planned job cuts as it seeks to reduce expenses. CEO Mary Barra sent an email on Thursday morning to salaried workers in America offering voluntary buyouts.
The automaker hopes the offers will expedite its planned downsizing initiative, which aims to save $2 billion by 2024. Furthermore, it hopes to save an additional $2 billion in operating costs by transitioning from internal combustion engines to electric vehicles, according to a statement from the company.
General Motors has been struggling to control costs, a problem which is likely to worsen as it faces weak sales in both the U.S. and abroad. Its margins have taken a sharp hit over the past few quarters due primarily to rising energy and raw material costs as well as an easing demand for new vehicles.
But General Motors also faces a dilemma with its capital-intensive factories, which have become more costly and take up resources that could be redeployed elsewhere, according to Maria Raynal from GM. One example is Lordstown, Ohio’s Chevy Cruze plant which produced 180,000 cars last year down from 248,000 in 2013.
In addition to the buyouts, GM is working to simplify vehicle design and create shared subsystems between its conventional engine vehicles and electric-vehicle (EV) programs. Furthermore, GM plans on cutting discretionary spending and shrinking staff size.
Analysts believe the goal of these retooling efforts is to gain control over cost pressures and enhance financial performance as the company braces for potential recessionary scenarios. Unfortunately, analysts note that these measures won’t be enough to avoid layoffs.
Due to the current auto industry downturn and potential recessionary conditions, auto sales could suffer further. General Motors (GM) and Ford (F)., the other Detroit-based automakers, must increase production in 2022 in order to keep up with demand; however, analysts anticipate a global economic slowdown later this year that could further hurt results.
Morgan Stanley and Bank of America analysts suggest GM must take measures to safeguard its profitability during a recession. For instance, they suggest focusing on building higher-margin vehicles like pickups and SUVs which they anticipate being in higher demand during such times. Furthermore, the firm should increase inventory levels – especially gasoline stock – so there are enough supplies in case of an economic downturn.
Buyouts
General Motors on Thursday unveiled a $2 billion cost-cutting initiative, offering buyout packages to most salaried employees. According to GM CEO Mary Barra in her letter to employees, those with five or more years of service at the time they sign up for the voluntary separation program will receive packages.
These offers come at a difficult time for the auto industry as General Motors (GM) and other major carmakers are transitioning from internal combustion vehicles to electric passenger cars. To make this change successful, GM must invest more in research and development, as well as massive capital expenses for battery factories and modernizing assembly plants.
General Motors expects to take a pretax charge of up to $1.5 billion due to the buyouts. Most of this cost will be incurred during the first half of 2023, according to GM.
Though it may seem like the perfect time for some employees to leave their company, buyouts aren’t suitable for everyone. Many individuals are struggling financially during a recession and many more may not be close to retirement yet.
David Kudla, CEO of Mainstay Capital Management in Bloomfield Hills, believes it’s critical for workers to carefully consider their financial situation before accepting a voluntary buyout offer. They should consider whether they have enough savings to live off of if they leave their jobs, how long they might live, and if any family members might be adversely affected by this decision.
A buyout may offer workers the chance to explore other career possibilities. When workers are uncertain of their next step, a buyout can provide them with the chance to discover.
Some local financial planners report their clients are receiving offers of up to six months’ severance pay, including health care coverage during that time. But some are concerned about GM’s potential plans to lay off many workers in the future.
General Motors (GM) is offering voluntary buyouts to white-collar workers with at least five years of service and global executives with two years. Each will receive one month’s pay for every year served, up to 12 months, supplemental health insurance, COBRA health coverage and a prorated GM performance bonus. Those who accept these offers must depart by June 30.
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