General Motors offers employee buyouts

Ivan Schwartz
November 3, 2018

General Motors followed up on a strong earnings report by offering company buyouts to tens of thousands of salaried workers.

The strong profit from GM's China joint venture came even with a budding tariff war with the USA and uncertainty over sales in the world's largest auto market. And its pretax profit in North America, its most lucrative market, rose 33 percent to $2.8 billion with a profit margin of 10.2 percent. "The voluntary severance program for eligible salaried employees is one example of our efforts to improve cost efficiency".

GM was hit once again by costs associated with its giant recall for faulty ignition switches.

Rival Ford (F) similarly cut salaried staff globally, though it has also not given any details about the extent of job cuts it plans.

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In July, GM lowered its full-year forecast, citing higher steel and aluminum costs due to tariffs. Ford, however, has an older product line, and said its net pricing in North America fell by $318 million in the third quarter.

Until now, GM had spared its home base from overhead cuts while tearing apart the company overseas during the past five years.

The average sale price of a GM vehicle in the USA reached $36,000 United States, $800 US more than a year ago and a third-quarter record.

Suryadevara said GM expects tariff-driven commodity price increases to cost the company $1.32 billion this year, $526.39 million in the third quarter alone. In addition, GM in June ended the second shift at its Lordstown, Ohio assembly plant, cutting 1,500 jobs. This week, the No. 2 US automaker 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. GM is expecting lower sales in North America and China in the coming months, and the company is also investing heavily in the development of electrified and autonomous vehicles. Simplification "will allow us to take significant structure out of the business, whether it's corporate staff, whether it's engineering staff", he said on an earnings conference call. Last year's quarter included a charge related to Europe. Excluding one-time items, the company made $2.46, far exceeding analyst projections of $1.64 per share, according to a survey by FactSet.

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