General Motors made big waves across the automotive and financial industries this week. First, they posted significant profits in the third-quarter earnings reports, which the Detroit automaker followed up by offering buyouts to around 18,000 employees. The move caught average investors, GM shareholders, the media, and the industry by surprise—although following the buyout announcement, GM stock rose swiftly.
Why would a massive automotive conglomerate want to pay 18,000 of its employees to retire? Well, as with any corporate maneuver, the bottom line is a major factor. Those workers, all of whom have worked for the company for at least 12 years, represent just over one third of GM's entire North American workforce, which numbers around 50,000 salaried workers. Not every employee is expected to jump at the offer, which Bloomberg reports will cost the company around $130 million per 1,800 that do accept the buyout. (That equates to around $72,000 per employee.)
For context, the last time GM offered voluntary severance packages was in 2009, when just about 1,900 employees accepted. And those that do hesitate in this round may very well be out of a job in the near future; GM spokesman Pat Morrissey explained that involuntary cuts may be required should the figures not add up.
GM's stats for Q3 2018 were exceptionally strong, with revenue listed at $35.8 billion, for a profit of $2.5 billion. Those figures are up just about 6 percent when compared to Q3 2017. Part of the reason for GM's impressive numbers comes down to the company's commitment to shedding higher-cost employees. GM said in a statement, "We are doing this while our company and economy are strong. The voluntary severance program for eligible salaried employees is one example of our efforts to improve cost efficiency."
Chief Executive Mary Barra has been laser-focused on cutting costs, having sold the company's European brands, Opel and Vauxhall, last year. That move contributed to GM beginning 2018 with a salaried employee headcount of 77,000 worldwide, down from over 90,000 in 2016. Whether or not the earnings report or the buyout program sparked investor confidence, GM stock was up around 10% shortly after both were announced.
One area where GM is actually hiring—for the moment—is the autonomous driving department, which is named GM Cruise and is based in tech-heavy San Francisco. Extensive hirings for that office have led to a staff of around 1,000, up from only 100 in 2016.