GM says 5,000 workers accepting buyouts expected to cost $1 billion in first quarter

GM states that 5K salaried workers will opt buyout program costing $1B charge in Q1

Last month, General Motors announced a buyout program aimed at reducing the company’s global headcount and fixed costs. As a result, approximately 5,000 white-collar employees chose to participate in the program. GM’s CFO, Paul Jacobson, stated on Tuesday that the company anticipates incurring a charge of roughly $1 billion during the quarter due to the program. This headcount reduction is in line with GM’s strategy to reduce structural costs by $2 billion by the end of 2024.

GM says 5,000 workers accepting buyouts expected to cost $1 billion in first  quarter
Image credits- Yahoo Finance

During a recent BofA Securities conference, GM CFO Paul Jacobson shared that the opt-in rate for the “Voluntary Separation Program” was as expected and has positioned GM to potentially avoid layoffs. According to a GM spokesperson, the majority of employees who opted for the program are expected to leave the company by the end of June. GM’s CEO Mary Barra had previously stated that if there weren’t enough program participants, involuntary actions might have to be taken.

General Motors offered buyouts to the majority of its 58,000 white-collar employees in the United States. Salaried employees who had worked at the company for at least five years as of June 30th of this year were eligible for the program, while executive-level employees with at least two years of service also qualified. CFO Paul Jacobson commented that the buyout program was a tool to accelerate the attrition curve, and it delivered a quick payback for the company.

Cost cutting

In January, GM announced a $2 billion cost-cutting program, with executives stating their intention to achieve headcount reductions through attrition rather than layoffs. They also projected that between 30% and 50% of the savings would be realized in 2023. According to CFO Paul Jacobson, GM is likely to fall towards the higher end of that percentage range for 2023. He added that the company has had a strong start in achieving its cost-cutting goals.

GM had previously disclosed in a public filing that it expected to incur a pretax charge of up to $1.5 billion in connection with the buyouts, with the majority of charges expected to be all-cash and incurred during the first half of the year. Paul Jacobson mentioned that GM is still evaluating the full extent of the charges and may incur additional costs in the second quarter. He added that the company will provide further information about the buyout program during its first-quarter earnings call scheduled for April 25.  Automakers are doing various cut cuttings, and Ford’s cost-cutting is only one among them. While the price war of the EVs continues, the lay-offs also continue as well.