Automaker General Motors Co. announced a voluntary separation program for its employees in an effort to accelerate the normal attrition process and the resulting cost savings. The move is part of its efforts to cut $2 billion in structural costs over the next two years.
In a regulatory filing, the company said it expects to take a pretax charge of up to $1.5 billion related to the buyouts, majority of which will be recorded in the first half.
Reports said citing a letter by CEO Mary Barra that the voluntary buyouts will be offered to a majority of the company’s 58,000 U.S. salaried employees.
It was on January 31 that GM announced its intention to implement a cost reduction program to reduce fixed costs by $2 billion on an annual run rate basis by 2024. Of these savings, 30% to 50% are expected during 2023 and the full amount expected in 2024.
The company then said the program would drive cost efficiencies by reducing vehicle complexity and expanding the use of shared subsystems between existing internal combustion engine and future electric vehicle programs. Further, GM planned to focus investment in growth initiatives to accelerate near-term benefits, decrease discretionary spending across substantially all parts of the company, as well as to reduce salaried staff through attrition, primarily in the United States.
In its latest filing with the U.S. Securities and Exchange Commission, GM noted that under the terms of the voluntary separation program or VSP, eligible employees who choose to leave the company will be offered a combination of lump sum payments and other compensation based on their years of service.
As per reports, the VSP will be offered to all U.S. salaried employees who have spent five or more years at the company as of June 30. Outside of the U.S., GM will offer buyouts to executives with at least two years of time at the company. Eligible employees interested in the program are asked to sign up by March 24.
The employees who agree for the buyout reportedly will get one-month pay for every year they worked up to 12 months, along with COBRA health coverage. This is in addition to prorated team performance bonuses and outplacement services. Global employees will receive base salary, incentives, COBRA and outplacement services.
CNBC quoted a GM spokersperson as saying, “Employees are strongly encouraged to consider the program. By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market.”
The expected $1.5 billion charges related to employee separation program will be substantially all cash-based. The company also sees up to $300 million in pre-tax, non-cash pension curtailment charges.
GM expects to incur the majority of these charges in the first half of 2023, with some additional costs incurred throughout the remainder of the year, and to make substantially all of the cash payments by the end of 2023.
The company reportedly announced last week plans to terminate about 500 salaried positions globally.
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