GM Announces Voluntary Layoff Plan and Cuts 5,000 Jobs to Save $1 Billion

More Than 5,000 Employees Join the Voluntary Severance Plan Announced by General Motors (GM). Job Cuts Expected to Continue to Generate Savings of US$ 1 Billion.

On Tuesday (4), General Motors (GM) announced that approximately 5,000 employees had joined the voluntary severance plan, as part of a cost-cutting initiative that, according to Paul Jacobson, chief financial officer, will allow the automaker to save US$ 1 billion annually.

General Motors Aims to Cut US$ 2 Billion in Costs

The job cuts account for 6% of the 81,000 professionals not working on GM’s production line, and are expected to allow the American automaker to avoid layoffs without cause, according to the chief financial officer. The voluntary severance plan is also expected to represent about half of the company’s broader goal of saving US$ 2 billion annually.

General Motors has set a target to cut US$ 2 billion in operating costs by the end of 2024, with 30% to 50% of the total expected to be achieved this year. The response to the voluntary severance plan will allow GM to reach the top of this target in 2023, according to Jacobson during a Bank of America conference.

Mary Barra, GM’s CEO, stated in an internal memorandum circulated on Monday (3) that the job cuts resulting from the layoff of hundreds of workers through the program will allow the company to achieve about US$ 1 billion of the US$ 2 billion expense reduction target. The executive also emphasizes that the automaker was not considering any layoffs without cause at this time.

GM Will Reduce Vehicle Complexity

Jacobson highlighted that General Motors would allocate 75% of its annual capital expenditures to electric vehicle projects and that it is expected to profit from U.S. government subsidies for the sector under the Inflation Reduction Act, thanks to its investments in batteries, electric vehicle assembly, and raw materials in North America.

GM will further cut spending by reducing vehicle complexity, increasing the use of shared subsystems among gasoline and electric models, focusing its investments on expansion initiatives with short-term benefits, as well as reducing expenses across the company, including marketing and travel. General Motors’ shares were down 2.64% around 1 PM in New York during trading on Wednesday.

GM and Volkswagen Grant Collective Vacation

The manufacturers GM and Volkswagen granted collective vacation periods in March this year for about 5,000 employees at their facilities in Taubaté and São José dos Campos, in the interior of São Paulo. Due to the global semiconductor crisis, the market is slowing down, and automakers in Brazil announced layoffs and production cuts between March and April.

Shutdowns also occurred at Hyundai’s plants in Piracicaba (SP), Stellantis’ in Goiana (PE), as well as Mercedes-Benz units in São Bernardo do Campo. At General Motors, the measure affected 3,000 employees at the company’s site in São José dos Campos (SP), about 80% of the production area. The return from collective vacation is scheduled for April 12.

The company did not respond to media inquiries, but the Metalworkers’ Union in the municipality stated that the goal is also to adjust inventory due to market acceleration and declining sales. The Brazilian automotive industry is going through a new phase of difficulties and has announced renewed production stoppages at its units in Brazil.