GM Taking $1.5B Charge to Pay for Separation Program

General Motors is looking for a few (thousand) volunteers — to leave the company.

Starting today, the company is implementing a “voluntary separation program” offering buyouts to salaried employees willing to take buyouts. Those eligible must enroll by March 24. The company employs about 58,000 white-collar workers, most are eligible for the program.

“As part of our plan to accelerate attrition and achieve $2 billion in cost savings by the end of 2024, General Motors is announcing a Voluntary Separation Program for all U.S. salaried employees with at least five years of service and all global executives with at least two years of service,” a company spokesperson said in a statement emailed to TheDetroitBureau.com.

“This voluntary program offers eligible employees an opportunity to make a career change or retire earlier. We are offering three packages based on level and service to the company. 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.”

Officials didn’t offer a target number or how many they expected would accept the offer. They also did not say how much would be saved using the measure.

CFO Paul Jacobson revealed in January the company was looking to cut about $2 billion in structural costs. To handle the VSP, GM will take a $1.5-billion pre-tax charge in the first half of 2023. The cuts won’t get the company all the way to its cost-cutting goal.

The Program

The VSP is for all U.S. salaried employees with at least five years of service, officials said. They would be eligible for one month of pay for every year of service up to 12 months and COBRA. They also received a pro-rated teamGM performance bonus and outplacement services to help find another job. 

Global executives with at least two years of service are eligible for a package which includes their base salary, incentives, COBRA and outplacement services. For those who are approved for the separation package will leave the company by June 30.

“We feel this program provides generous benefits and a unique opportunity to individuals and their families,” the company said in a statement.

The company expects its core auto operations to perform at a consistently strong level in 2023, with full-year net income attributable to stockholders of $8.7 billion-$10.1 billion, EBIT-adjusted of $10.5 billion-$12.5 billion, and EPS-diluted and EPS-diluted-adjusted of $6-$7.

GM also expects strong cash flows from automotive operations this year, including net automotive cash provided by operating activities of $16 billion-$20 billion. The company also predicts its adjusted automotive free cash flow will come in between $5 billion-$7 billion.

Previous cuts

GM sent 500 executives and salaried workers packing late last month, although they’re departures was for performance-related issues, the company noted at the time. Additionally, CEO Mary Barra said in January the company had no plans to layoff workers, but it was limiting its hiring to “strategically important roles.”

The company’s used separation programs in the past to help manage headcount. In late 2018, it looked to cut about 7,000 salaried workers from its ranks. However, the program had limited success. The company got a little more than half to sign up initially.

GM reportedly offered six months pay and six months health care beginning in February 2019 to North American salaried employees and global executives with 12 or more years of experience. The buyout offer came in late October 2018.

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• Source: https://www.thedetroitbureau.com/2023/03/gm-taking-1-5b-charge-to-pay-for-separation-program/