General Motors (GM) is laying out its plan to extract $2 billion in cost savings, and reductions in its labor force will be a big part of it.
“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,” a GM spokesperson said in a statement sent to Yahoo Finance. “By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market.”
GM will offer these buyouts for all U.S. salaried employees who have been with the company for at least five years and global executives with at least two years of service. Salaried employees who take the offer will receive one month of pay for each year of service with the company (up to 12 months), along with COBRA health insurance coverage. Executives who take the package will receive base salary, incentives, COBRA coverage and have access to outplacement services.
In an 8-K filing submitted by GM on Thursday, the automaker says it expects to take a $1.5 billion pre-tax charge, and up to $300 million in pre-tax, non-cash pension curtailment charges. GM said the majority of the charges would likely be incurred in the first half of 2023.
GM says its instituting this Voluntary Separation Program (VSP) in order to “accelerate fixed cost reduction efforts” which include efforts like reducing vehicle complexity, expanding use of shared subsystems between gas-powered cars and future EVs, and decreasing discretionary spending, among other things.
Only a few weeks back GM initiated performance-based job cuts, which the company made clear to say did not amount to layoffs, for 500 salaried employees, less than 1% of GM’s 81,000 global salaried workforce.
This came after GM reported strong fourth quarter earnings, driven by record revenue. At the time GM was adamant that layoffs where not being considered.
“I want to be clear, we’re not considering any layoffs as part of that [$2 billion in cost savings]. We’re going to manage headcount through attrition and targeted hiring for our priorities, but making sure that we’re monitoring costs so that if we do find ourselves in a situation where pricing weakens or we see softness in the consumer, we can react more quickly,” GM CFO Paul Jacobson said in an interview with Yahoo Finance following GM’s Q4 earnings release.
At the time, GM’s insistence of no planned job cuts was an anomaly given the overall industry at the time. Ford stated it would lay off 3,800 workers in Europe as part of it cost-cutting plan, and Stellantis idled its Jeep Cherokee plant in Belvidere, NJ, leaving 1,350 factory workers permanently furloughed starting on March 1st.
GM shares were trading lower in midday trading on Thursday.