General Motors makes buyouts available to most of its salaried workforce in the United States and some executives worldwide to cut costs as the company transitions to electric vehicles.
However, the Detroit automaker did confirm that the move is intended to accelerate attrition to meet an originally scheduled goal of $2 billion in cost reductions by the end of the following year.
Approximately 58,000 salaried employees are working for GM in the United States.
GM to produce strictly electric passenger vehicles only
According to the company, the offers are also intended to prevent any potential employment terminations at a later date.
Proposals will be made to white-collar workers who have been with the company for at least five years. It will also be offered to global executives who have been employed there for at least two years.
The automotive industry is currently switching from internal combustion to electric vehicles. The choice to offer buyouts comes at an unsettling time for the sector.
By 2035, General Motors intends to sell only electric passenger vehicles.
The transition necessitates increased spending on research and development for both types of vehicles, substantial capital outlays for the construction of battery factories and the modernization of assembly plants, and expenditures for the acquisition of scarce metals that are required for EVs.
Getting ready for a recession
Chief Financial Officer Paul Jacobson said at an analyst conference in February that the company is making these cuts to better prepare for any possible economic downturn or recession.
According to him, General Motors is seeing vehicle prices start to fall. However, the company’s auto sales are still doing well.
“We want to be cautious because we don’t want to ignore the macro signs that are out there, because I don’t want to be up here a year from now saying, ah, we missed it.”
Chief Financial Officer Paul Jacobson at the Wolfe Research Conference
Jacobson stated that the cost reductions would be partially achieved by filling only strategically significant jobs that had become vacant due to attrition.
CBS News reports the company’s announcement on Thursday that it would reduce the complexity of its vehicles. It also apparently aims to increase the amount of component sharing between its internal combustion and electric models to achieve additional cost savings.
In order to realize the benefits of its growth initiatives more quickly, General Motors plans to reduce discretionary spending across the entire company.
Sam Abuelsamid, an analyst with Guidehouse Research e-Mobility, stated that cost reductions might be necessary because there is a significant risk of a slowdown in auto sales. It comes when carmakers are starting to increase production after being hampered by a global shortage of computer chips.
“Up to this point, the auto markets have been pretty lucky because there has been so much pent-up demand over the last couple of years. Over the course of this year, it’s going to get to the point where that supply and demand even out.”
Sam Abuelsamid, an analyst with Guidehouse Research e-Mobility
According to Abuelsamid, GM and other automakers are offering few models at lower price points at this time. It means they are looking at fewer buyers who can afford their vehicles.
The switch to electric will be expensive
According to him, General Motors will most likely lay off some engineers who work on internal combustion engines because of the offers. He added that the company has already gone through a process of cutting staff to reduce expenses.
As said by Abuelsamid, automobile manufacturers like GM face enormous costs to convert factories from producing vehicles powered by combustion to producing electric vehicles.
He said the conversion took place at GM’s “Factory Zero” in Detroit. Still, virtually everything that took place inside the walls was different.
Employees interested in taking the buyouts have until March 24 to sign up for the program, and those who are accepted for the packages are required to resign by June 30.
It is being offered to salaried workers in the United States that they will receive one month of pay for every year of service, up to a maximum of 12 months.
They will also be offered a continuation of their health insurance through COBRA and some of the bonuses they are eligible to receive this year.
See Also:
- General Motors launches its Dealer Community Charging Program
- General Motors installs the first of 40,000 new electric vehicle chargers
- General Motors targets $50 billion in EV revenue
- General Motors boosts electric and intelligent connected vehicle rollout in China
- General Motors announced plans to debut 15 all-electric models in China by 2025
