In an effort to reduce costs, General Motors (GM) has announced that around 5,000 salaried workers have taken buyouts, resulting in the savings of $1 billion per year. The voluntary buyouts cover approximately 6% of GM’s 81,000 white-collar employees, allowing the automaker to avoid involuntary dismissals.
GM had set a goal of cutting $2 billion from operating costs by the end of 2024, with 30%-50% of the total being achieved this year. CFO Paul Jacobson announced during a Bank of America conference that the buyout program response means GM will be at the higher end of that 2023 goal.
GM CEO Mary Barra informed employees in a memo that the February job cuts of a few hundred jobs and 5,000 buyouts “have provided approximately $1 billion towards” the $2 billion target. She stated that “a company-wide involuntary separation program is not a consideration at this point.”
GM’s cost-cutting measures will involve reducing vehicle complexity, expanding the use of shared subsystems between gas-powered and electric vehicles, and decreasing “spend levels across all parts of the company, including travel and marketing,” according to Barra. Jacobson added that the automaker is now allocating 75% of its annual capital spending toward electric vehicle projects and is in a good position to benefit from U.S. electric vehicle subsidies under the Inflation Reduction Act due to its investments in North American battery, raw materials, and EV assembly.
GM’s Shares Decline
Despite the positive news for GM in terms of cost savings, shares of the company have dropped by 0.42% in pre-market trading on Wednesday. Nevertheless, the company’s move towards electric vehicles and its reduction in operating costs are likely to position it well in the long term.
GM’s cost-cutting measures and focus on electric vehicles may help the company to achieve its goal of reducing operating costs by $2 billion by the end of 2024. By reducing complexity, utilizing shared subsystems, and decreasing spend levels, the automaker can save money and increase profitability. While the initial reaction of the market to the cost-cutting measures has been negative, GM’s long-term prospects remain strong.