General Motors to Cut Staff and Lower Salaries

By  Kevin Gordon

02.10.2009

Following the ongoing trend of bad news for the automotive industry, GM is planning a staff and salary reduction. General Motors Corporation will cut 10,000 salaried workers or 14% of its workforce. Additionally, GM will temporarily reduce the salaries of a large number of those salaried workers that remain. Executives are not excluded from the plan, with a rule that executive salaries will be reduced by ten percent. Other pay reductions will range from three to seven percent.  The ranks of salaried employees will shrink from 73,000 to 63,000. Of these reductions 3,400 employees will be based in the United States.

These actions are part of the plan that GM had to submit to Congress in order to qualify for bailout funding from the federal government. This move is also to continue to reassure the government that GM is a viable company. The announcement follows the news that GM will extend more employee buyouts and early retirements and also trails GM buying out 5,100 salaried employees three months ago. Unlike previous actions, the employee cuts in this round will be done through involuntary layoffs; a large number of these eliminations will be complete by May 1. The laid off workers will receive a severance, have the option to carry their benefits forward (for an undisclosed period of time), and will receive help finding work.

A GM spokesperson said in a statement: “These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability.” A severe drop may be an understatement, as U.S., auto sales fell to a twenty-seven year low in January.

This news also follows the announcement that Bob Lutz will be leaving the company this year, as we reported yesterday. Ultimately, we find that the bad news avalanche only seems to pick up speed as it slides down the mountainside. The question is going to become, can this avalanche be stopped before GM has no other choice other than to file for bankruptcy protection? Whether you believe this is the correct thing to let happen from a capitalistic view or not, if you are a fan of the modern automobile, it would be a major blow to the category.

The one factor that is not accounted for here is the recently Senate-approved stimulus bill. Since the stated primary focus of this bill is to create and maintain U.S. jobs, it will be interesting to see if the final version of the bill (following the House-Senate conference) is able to stop the bleeding in the automotive sector before more jobs are lost.

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Author: Kevin Gordon

Kevin is Autosavant's owner and Editor-in-Chief, responsible for setting the overall strategy and editorial direction of Autosavant. He's also the primary contributor to Autosavant's YouTube channel (youtube.com/autosavant) where you can find a comprehensive library of new-car reviews.

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