As GM moves to EVs, most US workers will be offered a buyout

General Motors is offering most of its U.S. salaried workforce and some global executives the purchase in an effort to cut costs while transitioning to electric vehicles.

The Detroit automaker would not say how many workers it is targeting, but confirmed that the move is aimed at accelerating attrition to meet its announced goal of up to $2 billion in cost cuts by the end of next year. GM has approximately 58,000 salaried workers in the United States

The company says the recommendations are also designed to prevent potential fires later.

Awards are given to white-collar workers with at least five years of experience and global executives who have worked for the company for at least two years.

The decision to offer the purchase comes at an uncertain time for the auto industry, which is in the transition phase from internal combustion to electric vehicles. GM aims to sell only electric cars by 2035.

The switch would require more research and development costs for both types of vehicles, as well as greater capital expenditures to upgrade battery plants and assembly plants, as well as sourcing scarce metals for electric vehicles.

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Preparing for a recession

The cuts are being made to prepare for any potential economic downturn or recession, Chief Financial Officer Paul Jacobson said at an analyst conference in February.

While GM’s auto sales are strong, the company is seeing vehicle prices begin to decline, he said. “We want to be careful because we don’t want to ignore the macro cues there because I don’t want to be here a year from now and we missed it,” Jacobson told Wolfe Research. conference.

The cost cuts were announced when GM reported fourth-quarter earnings in January, which Jacobson said would be achieved in part by filling only strategically important jobs vacated by attrition.

On Thursday, the company said it would reduce costs by reducing the complexity of its vehicles and by sharing more components between internal combustion and electric models. GM plans to cut discretionary spending across the company and focus on growth initiatives to turn a profit faster.

Sam Abuelsamid, e-Mobility analyst at Guidehouse Research, said the cost-cutting may be necessary as car sales risk slowing as automakers ramp up production fueled by a global shortage of computer chips.

“So far, the auto markets have been successful because there has been a lot of demand in the last couple of years,” he said. “Within this year, it will reach a point where supply and demand will be equal.”

GM and other automakers also offer less cheap models these days, they’re looking at fewer buyers who can afford their cars, Abuelsamid said.

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Switching to electricity is expensive

GM may lay off some engineers working on internal combustion engines with the proposals, he said, adding that the company has already cut staff to cut costs.

Automakers like GM face huge costs to switch factories from making gasoline-powered vehicles to electric ones, Abuelsamid said. Detroit’s GM Factory Zero has undergone a conversion, but almost everything inside the walls has changed, he said.

Employees who wish to purchase must sign up by March 24, and those eligible for the packages must leave the company by June 30.

US salaried workers are offered one month’s salary for each year of service up to 12 months. They will also be offered COBRA health coverage and a portion of the bonuses they will receive this year.

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