Summary
General Motors (GM) announced a voluntary separation program (VSP) on March 9, 2023, as part of its previously announced cost reduction program aimed at reducing fixed costs by $2.0 billion annually by 2024. This VSP is designed to accelerate cost savings through employee attrition, with eligible employees offered a package of lump sum payments and other compensation. The company expects to incur significant pre-tax charges related to this program, estimated up to $1.5 billion in separation costs and up to $300 million in pension curtailment charges. These charges are expected to be largely cash-based and incurred primarily in the first half of 2023, with most cash payments anticipated by year-end. Importantly, GM anticipates that the majority of these charges will be treated as "special" items, meaning they will be excluded from adjusted EBIT, adjusted diluted EPS, and adjusted automotive free cash flow metrics. This allows investors to better assess the ongoing operational performance of the business, separate from these one-time restructuring costs.
Key Highlights
- 1GM is implementing a Voluntary Separation Program (VSP) to accelerate cost reduction efforts.
- 2The VSP is part of a broader program targeting $2.0 billion in annual fixed cost reductions by 2024.
- 3The company expects to incur up to $1.5 billion in pre-tax employee separation charges.
- 4Additional pre-tax, non-cash pension curtailment charges of up to $300 million are anticipated.
- 5The majority of these separation costs are expected to be cash-based and paid by the end of 2023.
- 6Most charges are expected to be recognized in the first half of 2023.
- 7These charges are anticipated to be treated as 'special' items, excluded from adjusted financial metrics.