General Motors is expecting to have reduced operating costs following the COVID-19 pandemic after it was forced to rapidly cut spending amid the global crisis.
Speaking to reporters on Tuesday, GM CEO Mary Barra explained how the automaker was forced to take a look at its expenses as the COVID-19 pandemic rocked the auto industry and make changes that she believes will stay in effect even after the economy has fully recovered.
“We were quickly able to take out significant costs and we are being very conservative about what costs we turn back on,” Barra said this week. “I believe we will come out of this with a lower cost structure that is permanent.”
Barra also said the automaker has “found things we don’t need to do and things we can do more efficiently,” in its day-to-day business practices, such as only building trim levels that customers will purchase at full or close to full price. This is a sector the company will focus on in the near future, Barra also explained, with plans to further reduce the number of model variants it offers to simplify its production processes.
“We think there is still significant work we can do from a complexity reduction perspective from the number of architectures we have to the complexity within a platform,” she said.
Barra also pointed to GM’s new-found focus on its Shop. Click. Drive. program, which enables it to quickly and efficiently match potential customers with the type of vehicle they are looking for. GM is currently working on an enhanced version of Shop. Click. Drive. that can handle the majority of a vehicle purchase transaction, which will make it even easier for dealerships to close sales. The online sales program has proven to be crucial for generating sales for GM amid the COVID-19 crisis.
Some of these cost-cutting measures came at the expense of worker salaries, as well. GM will defer 20% of cash payments to its salaried workforce for six months as of April 1st in response to the financial impact of the COVID-19 pandemic, while senior executives will take a 5% pay cut on top of the 20% cash deferral. Barra has also agreed to take a 10% pay cut and 20% deferral on her salary, as well.
Back in March, GM suspended its financial guidance for the 2020 calendar and fiscal years due to the COVID-19 pandemic whilst also drawing $16 million from its available line of credit.