About 5,000 General Motors white collar employees have taken buyouts, according to GM CFO Paul Jacobson.
Jacobson, speaking at an investor conference in New York on Tuesday, disclosed the number of employees who have taken package offered last month. He said that the company will take about a $1 billion charge in the first quarter, but that the downsizing will save the company about $1 billion on an annual basis.
The buyouts were offered to all US salaried staff with at least five years at the company and international executives who had worked at GM at least two years. There were three packages offered based on level and service to the company. While it was a voluntary program, GM told its staff that “employees are strongly encouraged to consider the program.”
“The voluntary program came in in line with our expectations,” Jacobson said. “We wanted to make sure we got a good take rate.” He said the company also wanted to avoid involuntary layoffs.
“We think we’re in position that we’ll be able to do that,” he said.
But while GM may avoid a widespread layoff, it did confirm in March that it cut a “few hundred” salaried staff “following our most recent performance calibration.”
GM has 81,000 salaried employees worldwide, with 58,000 of those in the United States. It also has 46,000 hourly US workers who are represented by the United Auto Workers. The company faces contract talks with the UAW this fall.
GM (GM) is not the only automaker lowering staff numbers in a cost-cutting effort. Ford (F) announced in August that it would cut 3,000 white collar jobs as part of its planned shift to EVs, with 2,000 being Ford (F) employees and 1,000 contractors. Then in March Ford (F) cut 3,800 jobs across Europe, citing difficult economic conditions and its shift to EVs.
Last year Tesla (TSLA) has also announced plans to cut about 10% of its salaried staff even as it adds hourly workers to increase production at two new factories in Austin, Texas, and Berlin.
But it’s not just salaried jobs being cut in the auto industry. Stellantis, which makes Chrysler, Dodge, Jeep and Ram vehicles, indefinitely idled its Belvidere assembly plant as of February 28, where it built the Jeep Cherokee compact SUV. The closing plans were announced just before Christmas. It most recently had 1,200 workers on a single shift at the plant.
GM is looking to cut costs as it tries to transition from traditional gas-powered vehicles to a fleet of all electric vehicles. GM expects to build 70,000 EVs this year, a small fraction of its overall vehicle output. It sold 5.9 million vehicles in 2022. But it has a target to build 400,000 EVs through the middle of 2024, and 1 million annually by 2025.
But Jacobson admitted that making the same level of profits on those EVs as it has on gas-powered cars will be difficult, telling investors Tuesday that “we expect EVs will be lower margins in the shortrun.” And that is driving its need to cut costs.
The company has a goal of cutting $2 billion in annual costs by the end of 2024. About half of those cost cuts will come this year, Jacobson said, at the high end of the company’s target to get 30% to 50% of the $2 billion in cost cuts coming in 2023.