Earlier this year, GM announced a new voluntary separation program, or VSP, wherein certain employees would be eligible to receive pay, health coverage, and other benefits for a limited time in exchange for voluntarily leaving the company. The VSP was announced as a part of an effort to reduce fixed costs and achieve $2 billion in savings over the next two years. Now, it’s been reported that roughly 5,000 salaried workers have opted to take the offer.
According to a report from CNBC, about 5,000 white-collar workers have opted to participate in the new GM VSP. GM CFO Paul Jacobson indicated that the VSP will result in a roughly $1 billion charge during the quarter, while also indicating that the program opt-in rate was in line with GM expectations. Some of the program costs may spill into the second quarter.
Last month, GM CEO Mary Barra said that if the VSP did not have enough takers, the automaker would resort to layoffs to achieve the reduced headcount desired. However, according to Jacobson, the results of the VSP are shaping up to avoid layoffs going forward.
The majority of employees participating in the VSP will depart GM by the end of June.
“This was a tool to get us to really accelerate the attrition curve; got a pretty quick payback,” Jacobson said. Roughly 30 to 50 percent of the savings realized in the cost-cutting program are expected this year.
As GM Authority covered previously, the VSP was offered to all U.S. salaried employees with at least five years of service, as well as all global executives with at least two years of service. U.S. salaried employees were offered one month of pay for every year of service, up to 12 months, as well as COBRA health coverage, a pro-rated team GM performance bonus, and outplacement services. Global GM executives were offered their base salary, incentives, COBRA, and outplacement services. The VSP offer concluded March 24th, 2023.
Further details on the VSP are expected during the upcoming Q1 earnings call later this month.
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Comments
These large companies see the writing on the wall. The economy is in the toilet, inflation is through the roof, interest rates are climbing with no end in site, etc., etc., etc.. Countless large companies (along with hundreds of medium-sized and small businesses) are downsizing in order to stay alive. Nobody wants to fail and ultimately have to board up their doors, but this economy is a mess and businesses are taking the proper steps to divert catastrophe.
I would ask though, how many (if any) did they employ over the last two years to keep up with the boom / changes and such?
I knew something was deeply wrong when the lots were barren, the dealerships were selling for 5-25% over MSRP, and ordered vehicles would take 6-28 months to arrive. The layoffs seem to be a part of that.
Unfortunately for your cause, the market is red hot. Proof is in the profit these companies are recording and did you take the time to see how well GM did in sales in this country?
What you call inflation, in reality it is just plain price gouging and companies knows that there is money out there and money to be made.
If the economy was in the toilet, like you are led to believe, you would see prices going down as the consumer would not be able to spend, and companies would have to scale back on their prices. That’s not the case today.
I’m going to pop your perception. GM will soon see the vast majority of its sales in electric vehicles. This means there’s no need to engineer powertrain systems. These engineers work on everything from induction systems to the bolts that hold connecting rods together. Same with transmissions. Your statement is uninformed and ludicrous at best.
GM will need to cut costs big time. Their all in on EVs is going to bite them in the butt and put them in the red for many quarters to come. It will be fun to watch as the shareholders turn on the current board and send them packing for products people want and products with a good profit margin.
The Board will turn on management too. Time to clean the house and get back to building vehicles that their customers want and can afford.
Boards never intervene until a company is nearly BK or has other major issues. Most of them just rubber stamp whatever management feeds them.
They’re rarely proactive.
Come on man… Get with the program! Tesla is showing the entire industry that EVs can be EXTREMELY profitable. Those machines they are building have a big sticker price but they are profiting 30% off each vehicle. And that is AFTER they reduced prices considerably. They are exceeding other luxury brands in volume and some volume automakers in profit. The big three are currently scrambling to match that kind of profit.
EVs are going to be the future whether you want it or not. NOT because of regulations though… its going to be way cheaper to manufacture them. They require thousands less parts, lots less to engineer and produce on the line and a lot less to service later. Tesla showed these companies the money on the table and they will be fighting tooth and nail to snatch it as fast as possible. Your next new vehicle will be electric. You just don’t even understand it… The ICE age is over. Get over it.
What about reducing prolifertaion of stupid options instead? There are so many of them with very few ordering them that the ROI when specific tools are used will never be paid through the life of the program and therefore trying to “offset” those costs with other simple and common sense options but very expensive, like the color choice.
It doesn’t seem like a winning strategy to reduce the workforce to save money while you can’t fulfill your customers’ orders. That’s a lose-lose survival strategy. Maybe too many eggs in the wrong basket?
I have to agree here, concentrating on making more profit while shrinking production and sales in the auto industry seems like a recipe for failure when you are supposed to be a mass marketer. In the 80’s and 90’s there was a term NoWaJaTOe, No wonder the Japanese are taking over.
Barra’s focus is margins & not volume hence killing Chevrolet Cruze. Unfortunately, Chevy isn’t BMW & it’s products aren’t incredibly desirable. This plan, like all EV by 2035, will fail. That expression one in the hand is worth it w hi in the bush fits here.
So who will do the work of 5,000 people? Will GM China pick up the space? Outsourcing? FCA could do things like this because Sergio Marchionne was willing to work 24/7. Barra isn’t the type
5,000 employees! Since this is an opt in program Im guessing that they want to get rid of their highest salaried folks. Hopefully some of the board of GM will take that package also (smirk smile as I type this) .
An employee must produce something of value to the company that employs them. These are white collar workers who in the traditional sense, sit in an office and dont get dirty. Ok, Please break down what these employees did. Were they engineers who designed items, parts, engines, etc. These workers will be replaced if they are truly needed with lower salaried employees.
Dang. I should have held on a little longer before retiring.
First statement that 5000 responded, then 5000 accepted are grossly incorrect statements by leadership. Majority of responders were denied without any credible reasons. Outside world may be naive but inside everyone knows that truth is hard to find.