General Motors said it will offer buyouts to most of its U.S. salaried employees as it works to cut $2 billion in costs over the next two years.
Voluntary severance packages will be offered to U.S. employees who have been with the company for at least five years and global executives with at least two years of service, CEO Mary Barra said in a memo to employees Thursday.
The buyouts are “designed to accelerate attrition in the U.S.,” Barra said in the memo, which was obtained by Automotive News and confirmed by GM.
“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,” GM spokesperson Maria Raynal said in an emailed statement. “By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market.”
Employees have until March 24 to consider the offer, and those who accept will leave the company by June 30, GM said.
Nonexecutives who take the deal would receive one month of pay for each year with the company, up to 12 months, along with COBRA health insurance coverage, a prorated performance bonus and outplacement services. Executives are eligible to receive base salary, incentives, COBRA insurance and outplacement services.
“This Voluntary Separation Program, known as a VSP, presents an opportunity to explore a new industry, make a career change, further a personal business venture or decide you can retire earlier,” Barra said in the memo.
The buyouts are expected to cost GM up to $1.5 billion in pretax employee separation costs, “substantially all” of that cash-based, and as much as $300 million in pretax, non-cash pension curtailment charges, the automaker said Thursday in a regulatory filing. The final cost will depend on how many employees accept the buyout offer, GM said, adding that most of the expenses would be incurred in the first half of this year.
The buyouts come a week after GM cut what it called a “small” number of salaried jobs for performance reasons.
At the end of 2022, GM had roughly 81,000 salaried employees, including 58,000 in the U.S., according to a federal regulatory filing. Barra said on an earnings call in January that the automaker was not planning layoffs as part of its $2 billion in cost cuts.
GM did not say how many employees it wants to accept the voluntary separation offer. Barra, in her Thursday memo, noted that “taking this step now will help avoid the potential for involuntary actions.”
GM’s effort to reduce the cost of its salaried work force comes as the company prepares to negotiate new contracts later this year with the UAW and Canada’s Unifor union covering hourly employees. UAW officials have signaled that they will be pushing for higher pay from the Detroit 3, which have posted sizable profits in recent years.
As much as half of the $2 billion in structural cost cuts could occur this year, GM has said. Barra’s memo said the automaker will look at reducing vehicle complexity, increasing the sharing of subsystems between internal combustion engine and electric vehicle programs and investing in growth initiatives, while also cutting discretionary spending and using attrition to trim its salaried employee head count, mostly in the U.S.