Detroit — A month after CEO Mary Barra said General Motors Co. was “not planning layoffs,” the Detroit automaker is cutting about 500 executive-level and salaried jobs, The Detroit News confirmed Tuesday.
The move, delivered amid impressive profitability, signals the evolving impact of electrification on legacy automakers like GM. The company isn’t providing the exact number of employees affected in the United States and sites overseas: as of December 2022, GM employed about 86,000 hourly employees and 81,000 salaried employees worldwide.
“Today’s action follows our most recent performance calibration and supports managing the attrition curve as part of our overall structural costs reduction effort,” spokesman David Barnas said in a statement. “This action impacts a small number of salaried employees and executives globally,”
The job cuts come as other companies and automakers also are offering buyouts, executing layoffs and making so-called “strategically important” hires amid economic uncertainty and increasing costs to electrify fleets. Last spring, crosstown rival Ford Motor Co. confirmed it was eliminating 2,000 salaried jobs and 1,000 contract positions in a bid to cut costs and boost competitiveness.
And late last year, Stellantis NV offered another round of buyouts to certain salaried employees but hasn’t said how many employees accepted the buyout offers. CEO Carlos Tavares has warned the inability to absorb the additional costs of electric vehicles could risk layoffs by shrinking the market.
GM is currently investing billions on EVs. This year, the Detroit automaker expects its capital spending to total between $11 billion and $13 billion, which is up the $9 billion to $10 billion it previously expected to spend this year. Much of that is earmarked for EVs. GM is now expected to spend more than the $35 billion it previously said it would spend on EVs and AVs starting in 2020 through 2025.
“We continue to shift resources to EVs, with around 75% of our product-specific capital dedicated to EVs and AVs,” GM CFO Paul Jacobson told investors during the Jan. 31 full-year 2022 earnings call.
Wedbush Securities analyst Dan Ives said in a statement that “GM is going through a major EV transition and cost-cutting is part of this process.”
“It’s a fluid time for the Detroit stalwart as they make this EV transition in 2023 and beyond with margin stability a laser focus for GM,” Ives said.
This year, GM is launching production of the electric versions of the Chevrolet Silverado, Blazer and Equinox. GMC has started production of the Hummer EV SUV and production is expanding on the pickup version of the Hummer, the Cadillac Lyriq electric crossover and BrightDrop electric delivery vans.
During its earnings calls with investors on Jan. 31, Barra and GM CFO Paul Jacobson said the company wasn’t planning any layoffs this year despite economic pressures and its goal to achieve $2 billion in cost savings over the next two years. Jacobson added the automaker expected to have a slightly lower headcount by the end of this year.
“I do want to be clear that we’re not planning layoffs,” Barra said at the time. “We are limiting our hiring to only the most strategically important roles, and we’ll use attrition to help manage overall headcount.”
To achieve the $2 billion in cost savings, Jacobson said the company would focus on reducing “complexity in all of our products and reducing corporate overhead expenses across the board. I do want to be clear, though, we’re not planning layoffs. We are limiting our hiring to only the most strategically important roles and will use attrition to help manage overall headcount.”
For 2023, GM anticipates adjusted earnings to be in the range of $10.5 billion to $12.5 billion for the year. Last year, the company booked record pre-tax earnings of $14.5 billion.
To save $6 billion, GM launched a restructuring effort in 2019 that included cutting 6,000 jobs and idling an assembly plant in Lordstown, Ohio, and powertrain plants in Baltimore, Maryland, and Warren, Michigan. Oshawa Assembly in Ontario and Factory Zero Detroit-Hamtramck Assembly Center were also on the list to be idled but GM saved both.
In a Tuesday letter obtained by The News, GM Chief People Officer Arden Hoffman said: “We are looking at all the ways of addressing efficiency and performance. This week we are taking action with a relatively small number of global executives and classified employees following our most recent performance calibration. They will be departing the company starting from today.”
Ford’s cuts came after CEO Jim Farley publicly stated the company had “too many people.” Shortly thereafter, he implemented a reorganization of the company into three separate business units focused on combustion engine vehicles, EVs and commercial vehicles.
Ford executives in recent months have referenced pervasive “dysfunction” within the business and the need for further cost reductions, saying that “everything is on the table.” They’ve also disclosed what they believe is a $7 billion to $8 billion cost disadvantage compared to their legacy competitors. Those remarks from top executives came after the Blue Oval missed its earnings guidance for 2022 and posted a net loss for the year.
Farley has publicly discussed the challenges around pulling off what he calls a “double transformation” involving building out a new growth business around EVs and software, while at the same time repairing the legacy business that is underpinning the costly shift to plug-in vehicles.
Ford also recently announced plans to cut 3,800 jobs in Europe as part of a broader effort to revitalize its Europe business amid “rapidly changing market conditions” and an increasingly competitive EV market.
The push to cut costs comes as automakers are “spending enormous amounts of money on electric vehicle design, electric vehicle manufacturing, electric vehicle planning, but are not yet making any money with those electrical vehicles and that squeeze is affecting the rest of their operations,” said Patrick Anderson, CEO of East Lansing-based Anderson Economic Group.
And automakers cannot avoid “the impact of reducing U.S. car sales from 16 million units to 14 million units or even 13 million units,” he added. “The plain fact is that we’re selling fewer cars.”
Cox Automotive, an automotive services company, expects 14.1 million new light-duty vehicle U.S. sales in 2023, up from the 13.7 million vehicles when dealers had limited supply as a result of supply chain issues. Cox expects February sales to increase year over year with improving inventory levels and fleet sale increases.
