General Motors Co. began offering a voluntary separation program to save annual fixed costs worth $2 billion. It is against the backdrop of auto companies in the US preparing for an economic downturn because they are coming off robust profitability.
Offers lump sum payments under the voluntary separation program
In today’s latest business news, General Motors is making buyout offers to white-collar employees in the US who have put in at least 5 years of service as of June 30. It roughly accounts for 58,000 salaried employees in the US. Under this voluntary separation program, the eligible employees will receive lump sum payments and other compensation from General Motors. It is the normal attrition process accelerated by the Detroit Company.
Around 81,000 salaried employees are working at General Motors worldwide. The auto giant has not specified how many will accept the voluntary buyout offer or how many are eligible for this offer. General Motors expects to spend up to $1.5 billion before tax on separation charges. In addition, the company will also incur $300 million in pension curtailment charges.
The voluntary separation program is part of the plan outlined in January by General Motors to achieve $1.5 billion in cost savings by the end of next year. These efforts will help General Motors realize targeted savings of 30% to 50% in 2023.
In a statement by General Motors on Thursday, the company encouraged employees to accept the buyout offer. It helps the automaker bring down costs permanently and improve profitability. The company can also stay competitive in the market among its peers.
According to General Motors, the US employees who are ready to accept the buyout offer need to inform the company latest by March 24 and should be ready to leave the company by the end of June 30. The emphasis is now on protecting profits because of expected economic uncertainty. Several industries and technology companies, such as Boeing Co. and Amazon.com Inc., have announced cuts in white-collar jobs in recent months.
Expects to cut 500 jobs
In the recent period, General Motors has initiated measures to reduce spending and strengthen its balance sheet earlier than expected because of the expected downturn for the auto market in the US. According to the most recent news on US news websites, General Motors will cut 500 jobs after the performance reviews.
Several automakers are trying to eliminate inefficiencies, tighten their belts, and shut down loss-making projects that were initiated during the boom years in the industry. According to a communiqué on Thursday, General Motors also plans to share common components across the vehicles and reduce discretionary expenses.
Ford Motor Co. has removed 3,000 employees in the past summer. The company also signaled further job cuts because it is trying to expedite its cost-saving measures and streamline its vehicle offerings. Rivian Automotive Inc., an EV startup, has removed 12% of its employees in the past seven months. Inventories at dealerships in the US are bouncing back and putting downward pressure on pricing because of intensifying completion. The demand for new cars is also sluggish because of rising interest rates.