ibusinesslines.com November 17, 2018

GM looking to slash salaried workforce, offers buyout to 18,000 employees

03 November 2018, 07:17 | Kelvin Horton

GM Offers Buyouts to 18,000 Workers, Months After Warning About Layoffs Over Trump's Tariffs

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As General Motors reported a healthy $3.29 billion third-quarter profit, the Detroit automaker ramped up its cost-cutting efforts by offering buyouts to 18,000 white-collar workers in both the United States and Canada.

"We sent a letter to employees saying any salaried employee in North America with 12 years or more experience will have the opportunity to take a voluntary severance program", GM spokesman Pat Morrissey said.

GM also said its GM Financial business would initiate a $375 million dividend payment to the parent company in the fourth quarter, ahead of the 2019 target. Terms of the buyouts weren't released.

The voluntary severance program was announced shortly after the company's third-quarter earnings report where it reported an operating profit of $2.5 billion and 10.2% profit margins in North America, The Detroit News reports.

"We are doing this while our company and economy are strong", the company said in a statement.

The automaker is making the cuts in response to rising commodity costs, said CFRA analyst Garrett Nelson. However, they typically occur when a company is restructuring or going through a decline.

GM has cut production at auto plants over the last two years and its hourly workforce fell by 4,000 workers last year, according to GM's annual report.

GM also cited increasing material costs caused by new tariffs on foreign metals imposed by the Trump administration.

For Detroit's automakers, rising materials costs caused by new tariffs on foreign metals imposed by the Trump administration are converging with a slowly deflating US market and a sharper falloff in China, the world's largest auto market. Ford, however, has an older product line, and said its net pricing in North America fell by $318 million in the third quarter.

GM's US rival, Ford (F), said in early October that it plans to thin the ranks of its salaried workforce by the second quarter of next year.

GM's biggest USA rival Ford also is working to reduce its salaried workforce. This week, Ford is holding three days of meetings to discuss ways to flatten the structure of its salaried workforce and get managers to oversee larger numbers of employees. The company was resilient in a declining Chinese market, where it posted record third-quarter income of $865.88 million from July through September. That result was in spite of the sharpest industry sales drop in almost seven years during September. In an earnings conference call, he told analysts that GM is looking for cuts as it simplifies its business after its exit from Europe.

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