GM Tightens Its Belt
General Motors figures it will need all the cash it can get this year to ride through the revenue drought being generated by the coronavirus-related sales slump.
Earlier this week the company drew down $16 billion from its existing lines of credit. Now it’s cutting salaries, trimming marketing budgets and delaying some of its new-product development programs.
GM says it will realize a “significant” but unspecified immediate cash savings by reducing wages for salaried staffers.
The company will begin with a 20% pay cut for all 69,000 of its salaried employees worldwide, starting on April 1. The company pledges to repay the difference in a lump sum no later than March 15, 2021.
Upper-level executives will take an additional 5% non-deferred pay cut for six months. For top management, it’s an extra 10% reduction. GM board members face a straight, non-deferred 20% pay cut through the end of 2020.
GM also is putting 6,500 of its salaried employees—mostly engineering and manufacturing staffers who cannot work remotely—on “salaried downtime paid absence.” This means they are being put on temporary leave at 75% of their normal pay, a shortfall that won’t be repaid.
The good news for people in all these groups: Your healthcare coverage won’t be affected.
Delayed Product Programs
Not surprisingly, GM says all its product development programs worldwide are looking for ways to defer spending or adjust program timing to conserve cash.
But models close to launch won’t be affected. GM confirms there will be little or no impact for the upcoming redesigned Chevrolet Tahoe, GMC Yukon and Cadillac Escalade SUV programs.
GM says the same is true for the company’s electric vehicle portfolio. Untouched programs include Chevrolet’s Bolt EUV crossover, Cadillac’s Lyriq small crossover, the Cruise Origin driverless transport shuttle and GMC’s Hummer SUV.
Marketing Reductions and More
With car sales temporarily tanking, GM also is trimming its marketing budgets, CEO Mary Barra says in an email to employees. The reductions are among “hundreds” of actions being taken to lower the company’s demand for cash.
Barra says GM has been fortifying itself for several years after the Great Recession to become more resilient. Now, she adds, those steps are being tested.
Dhivya Suryadevara, GM’s chief financial officer, told employees yesterday that taking dramatic action now will avoid doing “serious damage to the long-term viability of our company.”
But until the crisis wanes, she adds, the company is prepared to operate temporarily on credit. That’s a reality everyone can relate to these days.
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