GM on profit roll, offers 18,000 workers buyouts
DETROIT — General Motors will attempt to cut costs by offering buyouts to about 18,000 whitecollar workers in North America.
The company made the offer Wednesday to salaried workers with 12 or more years of service.
The announcement comes on the same day that GM reported a $2.5-billion US third-quarter profit. The company said although it is performing well, it wants to continue to reduce costs while GM and the economy are strong.
The auto industry faces looming troubles such as slowing sales in the U.S. and China and higher steel and aluminum prices due to U.S. tariffs.
CEO Mary Barra said on an earnings call that the company is “taking steps to transform the workforce to ensure we have the right skill sets for today and the future while also driving significant efficiency.”
GM wouldn’t disclose terms of the buyout offers, including how many Canadian employees would be eligible for the package. The company has 50,000 salaried workers across North America, including about 2,000 in Canada.
Company spokesman Patrick Morrissey wouldn’t say whether GM is trying to reach a target number of employees. Those who were given the offer have until Nov. 19 to make a decision, and they would leave the company by the end of the year, he said.
“Even with the progress we’ve made, we are taking proactive steps to get ahead of the curve by accelerating our efforts to address overall business performance. We are doing this while our company and economy are strong. The voluntary severance program for eligible salaried employees is one example of our efforts to improve cost efficiency,” GM said.
GM has long talked about reducing costs in preparation for an economic downturn. The company strives to continue churning out profits through vehicle sales while, at the same time, investing in new technologies such as electric or autonomous cars. The company is close to delivering on a promise to reduce structural costs by $6.5 billion annually by the end of this year.
The efficiency push is an effort to stave off any repeat of its financial disaster in the past downturn, said automotive analyst Dennis DesRosiers.
“This is a company that went through a harrowing experience with their bankruptcy in the United States, so they’re doing the things necessary to make sure they never see that light again. So they’re addressing their cost structure, it’s as simple as that.”
Industry staff also require significant skills upgrades as the automotive space looks to new technologies such as self-driving cars and electrification, said DesRosiers. “You’re not going to perform well in this industry unless you upgrade your skills, top to bottom.”
Savings from the GM employee reductions would come in 2019, after the buyouts take effect.
Morrissey wouldn’t say if GM will begin to lay employees off if too few workers take voluntary buyouts. “We will evaluate the need to implement after we see the results of the voluntary program and other cost reduction efforts,” he said.
Retired chief financial officer Chuck Stevens hinted at whitecollar cutbacks in April 2017 when he told analysts that GM is looking for cuts as it simplifies its business after its exit from Europe. Simplification “will allow us to take significant structure out of the business, whether it’s corporate staff, whether it’s engineering staff,” he said on an earnings conference call.
Last year, GM sold its European Opel and Vauxhall units to France’s PSA Group.
Most of GM’s salaried workers are in the U.S., mainly in Michigan, at its Detroit headquarters.
Shares of GM, which had been falling since June, closed up $3.05 or 9.09 per cent at $36.59 on the New York Stock Exchange.