GM offers buyouts to 18,000 salaried workers
General Motors is offering voluntary buyouts to salaried workers in North America, acknowledging Wednesday that if it does not get enough takers, it may consider layoffs early next year.
Shortly after reporting better-than-expected third-quarter earnings, CEO Mary Barra sent an email to all 50,000 salaried GM employees in North America at about 8:30 a.m.
"We sent a letter to employees saying any salaried employee in North America with 12 years or more experience will have the opportunity to take a voluntary severance program," said GM spokesman Pat Morrissey.
GM has been cutting costs for several years. Wednesday, it said it would make $6.5 billion in reductions for 2018. The job cuts will not benefit GM until 2019, Morrissey said.
GM reported good third-quarter results, proving the automaker is, "still in a good place in terms of our performance and the future." It will continue recruiting and hiring workers needed for next-generation transportation, Morrissey said.
Depending on how many workers take the offer and other cost-cutting efforts, Morrissey said, "we'll re-evaluate doing an involuntary program after the first of the year."
In the midst of this, GM will continue to recruit talent for certain areas of the business it is expanding, namely engineering and technology for its work on self-driving and electric cars, he said.
"We always have the need to acquire new talent. We're trying to address ongoing efforts to reduce costs but continue our efforts in working on the future of mobility," said Morrissey. "We'll continue to recruit in select areas of the business."
“That is the right thing to do for the business, but it will be a big bone of contention from those pushed out or terminated for lack of the needed skills,” said Jon Gabrielsen of J.T. Gabrielsen Consulting. Gabrielsen is a market economist who advises automakers and auto suppliers.
It’s difficult to predict whether such voluntary job cut programs will have a high or a low take rate, Gabrielsen said. It depends on the ages of the people who get offers. GM said it is not an early retirement program. That means some people in their 30s or 40s might accept the offer because they want to change careers or they fear getting cut after bypassing a generous buyout, said Gabrielson.
But he said he has seen enough similar programs to estimate that about 7,000 salaried GM workers in metro Detroit will likely voluntarily take a buyout or be laid off over the next two years. He said the same will be true for Fiat Chrysler and Ford salaried employees in metro Detroit, with Ford being a little higher.
The company has hired 17,000 salaried and hourly workers in the past two years and spent $1 billion remaking its offices to be modern workspaces. It also has won two major investments in its work on autonomous vehicles, with Japan's SoftBank and Honda partnering with the carmaker's Cruise division.
The company says that 40 percent of its 67,000 salaried full-time global workers have been hired in the past five years.
Employees who are eligible for the buyout are being informed Wednesday, Morrissey said. They have until Nov. 19 to make a decision. Those who opt to take the buyout have until the end of the year to continue with GM, with severance effective Jan. 1.
Crosstown rival Ford also is working to reduce its salaried workforce. Ford has not provided specifics on how many jobs will be cut or over what time frame in its $11-billion "fitness" plan.
Earlier Wednesday, GM announced better-than-expected third-quarter results. For the quarter, GM reported a net profit of $3.2 billion before taxes, up 25 percent from a year earlier. It recorded a $5.4-billion loss in the third quarter last year after selling its European operation.
After taxes, net income was $2.5 billion.
The job reductions are meant to keep GM lean as it faces sales plateaus, rising commodity costs, a trade war and impacts from currency fluctuation.
"We’ve been on a journey to transform the company, both in how we operate the business and in how we lead in the future of mobility. Even with the positive progress we’ve made, we are taking proactive steps to get ahead of the curve by accelerating our efforts to address overall business performance," said Morrissey in a statement.
He said GM is trimming "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."