General Motors executives painted a bleak outlook of the global economy in offering buyouts to 17,700 employees last month.
“We must take significant action and now while our company and the economy are strong,” they said in talking points given to managers in October to discuss the severance plan with staff. CNBC obtained the “leader talking points,” and GM verified their authenticity.
An “intensely competitive” industry combined with pressure from rising commodities prices, interest rates and a difficult trade environment created a sense of urgency. “We need … to make the right pre-emptive moves so that we come out of this tough time ahead,” they said in the talking points.
The Detroit automaker on Monday announced plans to halt production at five factories in North America and cut about 14,000 jobs in the company’s most significant restructuring since its bankruptcy in 2009. The news falls on the heels of an otherwise strong quarter. Its third-quarter earnings released Oct. 31 — the same day GM started soliciting the buyouts — showed its first year-over-year earnings growth since the first quarter of 2017 and sent the stock soaring 9 percent.
‘Not an option’
But executives saw stiff competition and a tough economy ahead. The cuts are designed to free up some cash and position its workforce of 180,000 for the future of autonomous vehicles and electric cars.
“We cannot afford to wait and see what happens in the industry, or with China, or in international trade or currency, to then react,” the severance document said. “Even if macro-economic factors are partially to blame, continuing to lower guidance to Wall Street is not an option.”
GM offered voluntary buyouts to roughly 17,700 eligible employees in North America with at least 12 years of service, according to the document. The company was aiming for 8,000 voluntary buyouts among its salaried workers as part of a total headcount reduction of 14,000, spokesman Pat Morrissey confirmed. He said about 2,250 workers accepted severance agreements by the Nov. 19 deadline.
The carmaker previously said that involuntary layoffs would follow if there were not enough takers. Roughly 5,750 salaried workers and 6,000 hourly employees will be laid off, he confirmed. Half of the hourly workers are in Canada with the other half in the U.S., where the company will work with union officials to try to move to other plants, Morrissey said.
Salary and benefits
GM is allowing some employees who took the buyouts to leave as early as this coming Saturday with an official last day of Jan. 31 and salary and benefits continuing for six months after that. Executives could also leave in December with an effective last day of Feb. 28 and a full year of salary and benefits, according to the severance materials.
GM warned this summer that the trade war instigated by President Donald Trump could force job cuts in the United States. Trump was irate with GM’s announcement this week, tweeting on Tuesday that he was “very disappointed” with the company and CEO Mary Barrafor idling plants in Ohio, Michigan and Maryland.
“Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get,” Trump tweeted. He also threatened to cut all of the company’s federal subsidies, following up on Wednesday with the announcement that the administration was studying all tariffs on cars imported to the U.S. because of the “G.M. event.”
GM says the move would help to save $6 billion a year. Shares of the company jumped 4.8 percent on the announcement Monday, but Trump’s tweets drove the stock down Tuesday and Wednesday. Its shares have fallen by almost 20 percent during the last year.
“A strong cash position is the only way the company can deal with these factors and also continue to invest in growth opportunities and to set ourselves up for the future,” the talking points said.
“The leadership team is very focused on improving our cash generation and profit performance on each of our vehicles.”
— CNBC’s Robert Ferris contributed to this article.