The Detroit News reports that General Motors is offering a severance program to salaried workers with 12 or more years at the company. The buyout is voluntary at this point, and it’s available to 18,000 workers under the GM umbrella – more than a third of the automaker’s North American workforce. According to the report, GM’s goal with the program is cost savings but specific details are not available. At this time there’s no indication that layoffs are planned, but the company will reportedly reevaluate the situation after the buyout program concludes on November 19.

This is a rather surprising move considering GM also posted exceptionally strong third-quarter profits today. In a press release (available at the bottom of the page), GM listed revenue of $35.8 billion, which is a 6.4 percent rise versus the third quarter of 2017. The company reported third-quarter profits of $2.5 billion, as well as record third-quarter equity income in China and a record GM Financial EBT of $500 million. In other words, it seems things at the Detroit giant are pretty darned good considering crosstown rival Ford is facing all kinds of woes.

So what’s with this cost-saving employee buyout all of a sudden? Digging a bit deeper, profits are up but vehicle sales aren’t quite as robust. It’s the profit margins that are higher – GM is making more money on each vehicle sold – but overall sales volume is down. We aren’t sales pros or financial wizards, but banking more coin per vehicle while sales drop doesn’t sound particularly sustainable to us. When you consider pretty much every automaker is experiencing a sales slump – with some people even saying it’s a prelude to another big recession – there’s certainly a reason for GM to be nervous. Still, offering to cut a third of the workforce while banking $2.5B seems very strange to say the least.

In any case, we suspect this announcement of potentially drastic cost-cutting amid billion-dollar profits at GM will leave more than a few people scratching their heads.

Source: The Detroit News, GM

Source: Motor1

October 31, 2018