Mary Barra avoids involuntary action in the future things are not looking good for General Motors
As you heard in that letter from Mary Barra, she said this is being offered to avoid involuntary action in the future things are not looking good for General Motors and Mary Barra, the company is constantly linked with financial issues and rumors of impending bankruptcy.
The CEO always seems to have an answer and a new plan, but Mary Barra has just done something that has shocked everybody, the company has started to take some drastic steps to cut costs fast, and it’s a huge red flag that the rumors are true to join us as we take a look at what GM has done and what it means for the company before we get into details, it’s important to understand how GM got into this situation.
There have been many ups and downs throughout the history of General Motors the first founder of GM was William C Durand who then bought Buick Motor Company William Mott was one of the founding Proprietors of General Motors when it was established in 1908, then Cadillac Elmore Oakland pontic’s predecessor, and then Chevy entered the picture through all these General Motors was a company that would endure GM also produced vehicles for many years however with the successful ones came the spectacular fails as well.
The reliability of a car is more crucial than whether it is successful or not sadly, some vehicles with such recurrent issues can take a brand down with them, for instance, GM made headlines in 2018.
Because of 110 crashes and many casualties, in this case, a malfunctioning vacuum pump that interfered with the brake assist function was the cause of the issue, in essence, this lengthened the vehicle’s stopping distance increasing.
The likelihood of accidental Ford collisions ultimately 3.4 million cars to be recalled, and GM was left looking guilty besides that GM recalled approximately 6200 police pursuit cars in 2016 due to severe power steering problems.
These were updated Caprice models that were hilariously flawed when used as police vehicles, the PD would have none of these anymore effectively throwing GM out of the Wheeled Force after being recalled and fixed, and the vehicles had to be sold to the general public another error with power steering this time it involved Chevrolet trucks and SUVs and resulted in a significant recall.
We’re talking about over a million 2015 model year vehicles from Cadillac, Chevrolet, and GMC during slow turns these vehicles frequently lose power steering before regaining a low voltage during low-speed turns was to blame, and the 2018 recall was made to fix the sporadic electrical system also, GM had another forgettable year in 2014 in terms of recalls globally 470000, GM vehicles recalled for a variety of causes.
It was the non-functional windshield wipers and about 4 800 Chevrolet Caprice and Chevy SS models, and a malfunctioning transfer case control module software that caused many SUVs and trucks to roll away or to cease going forward, a summation of many more of these kinds of issues has given the company terrible press in the last couple of years, and now it’s in big trouble.
Now to save the company from failing GM execs have announced that it is laying out its plan to extract two billion dollars in cost savings, and reductions in its labor force will be a big part of it in a memo to staff members obtained by Reuters.
GM CEO Mary Barra stated that the automaker was identifying the biggest opportunities to lower structural costs such as reducing vehicle complexity and increasing the use of shared subsystems between the existing internal combustion engine and future electric vehicle programs, in addition, she mentioned a decline in the discretionary spending, as well as a reduction in salaried staff through attrition mainly in the United States in a statement sent to Yahoo finance a GM spokesperson, said this voluntary program offers eligible employees an opportunity to make a career change or retire earlier we’re offering three packages based on level and service to the company employees are strongly encouraged to consider the program by permanently bringing down structured costs we can improve vehicle profitability and remain Nimble in an increasingly competitive market.
So all salaried employees in the United States with a minimum tenure of five years and worldwide Executives with a minimum tenure of two years will be eligible for these buyouts from GM salaried workers who accept the offer will also receive Cobra health insurance coverage along with one month of pay for each year of employment with the company up to 12 months the package includes a basic salary bonuses Cobra coverage and access to outplacement services for executives who accept it what this means is that the company is trying to offer employees money to leave their jobs.
GM reports that it expects to incur a 1.5 billion pre-tax charge and up to 300 million dollars in pre-tax non-cash pension curtailment charges in its 8K filing, according to GM.
The bulk of the cost will probably be incurred in 2023’s first half GM says it’s instituting this voluntary separation program VSP to accelerate fixed cost reduction efforts which include among other things efforts to lessen vehicle complexity and increase the use of shared subsystems between current gas-powered vehicles and upcoming EVs and cut back on discretionary spending.
Only a few weeks back, GM initiated performance-based job cuts, which the company made clear to say did not amount to layoffs for 500 salaried employees less than one percent of GM’s 81 000 Global salaried workforces, that comes after General Motors reported strong 4th quarter earnings fueled by record Revenue.
GM was adamant at the time that layoffs were not being considered following GM’s Q4 earnings release GM CFO Paul Jacobson said in an interview with Yahoo finance. I want to be clear we’re not considering any layoffs as part of that two billion dollar in cost savings, we’re going to manage headcount through attrition and targeted hiring for our priorities but making sure that we’re monitoring costs.
So that if we do find ourselves in a situation where pricing weakens or we see softness in the consumer we can react more quickly.
The state of the industry at the time GM’s insistence at the time that no employment Cuts were expected was unusual as part of its cost-cutting strategy, Ford announced that it would lay off 3 800 employees in Europe, and Atlantis idled its Jeep Cherokee plant in Belvedere in New Jersey putting 1350 Factory workers on permanent leave as of March 1st the news comes as job cuts by U.S businesses have reached their highest level since 2009 over the past two months with the tech industry accounting for more than a third of the more than 180000 job Cuts announced.
The biggest U.S manufacturer announced a two billion dollar cost-cutting goal in January which included reducing employment through attrition Bar Road by permanently bringing down structured costs we can improve vehicle profitability and remain Nimble in an increasingly competitive market now more than ever we need to have a mindset of taking cost in everything we do it needs to be built into our culture.
Ford also did something similar when it announced that it intends to cut 3800 jobs in Europe over the next three years to adopt a leaner structure as it focuses on electric vehicle production, in Germany 1300 jobs will be cut in Industrial Development and administration, and 200 jobs cut elsewhere in Europe.
It announced that it would keep about 3400 technical positions in Europe that are devoted to the design and development of vehicles as well as the development of related services according to the automaker, 34000 employees work for it in Europe the change won’t impact Ford’s goal to provide an all-electric Fleet by 2035.
The company expects to start production of its first electric passenger vehicle later this year Ford’s restructuring comes as the company works to recover from dismal fourth-quarter results that were down 11 billion dollars from the same time last year and fell shy of the automaker’s own guidance by 1.1 billion dollars Forge suppressed earnings were primarily due to execution and Supply Chain management challenges according to Chief Financial Officer John Lawler who noted that the automaker’s sales last year were 100000 units below expectations.
That isn’t a new issue though as automakers already made changes to their Workforce before and during the pandemic to prepare for the huge EV transition and the introduction of other industry-changing shifts, for instance, Ford cut 7 000 jobs in 2019 in response to the protracted union strike.
Jam cut tens of thousands of jobs and closed factories that year both businesses made these reductions as they got ready to rethink their operations for an electric future Martin French managing director at the consultancy barrels speaking to Insider said we’ve become used to seeing the automotive industry adapting and resizing for many years.
Now he pointed out that the bankruptcy filings of GM and Chrysler in 2009 taught the entire car industry many difficult lessons causing many to take a defensive stance rather than reacting to tough times when they hit while everyone is cutting jobs.
Tesla is taking advantage of the situation and trying to steal market share by significantly reducing the price of its vehicles.
What do you think about this issue, let us know in the comments section.
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