Written by Joseph White and David Shepardson
(Reuters) – General Motors Corp.’s chief financial officer said Tuesday that about 5,000 payroll workers at General Motors have made purchases to leave the company, putting the company on track to meet its $2 billion cost-cutting goal.
General Motors shares fell 2.1% in afternoon trading, although Chief Financial Officer Paul Jacobson said demand for GM trucks and SUVs remained strong in the United States.
GM has managed to raise prices in the US over the past two years as supply chain bottlenecks have kept production in check. Going forward, Jacobson said the opportunity to increase prices further “isn’t there. We’ve got to be more aggressive about cutting costs.”
GM has set a goal of cutting $2 billion in operating costs by the end of 2024, with 30%-50% of the total being achieved this year. Jacobson said during a Bank of America conference that the response to the acquisition program means that GM will be at the higher end of the 2023 target.
General Motors CEO Mary Barra said in a note to employees on Tuesday, seen by Reuters, that the February job cuts of a few hundred jobs and 5,000 acquisitions “provided nearly $1 billion toward the $2 billion goal.” She added that “a company-wide involuntary firing program.” Not a consideration at this point.”
Jacobson said GM will cut production to keep inventories under control. The automaker earlier this year shut down its pickup truck assembly plant in Fort Wayne, Indiana, for two weeks.
He said General Motors would take on $1 billion in the first quarter. The company had previously expected $1.5 billion in fees related to employee cuts.
Jacobson said GM now allocates 75% of its annual capital spending to electric vehicle projects, which in the short term will be less profitable than the automaker’s combustion vehicles.
Jacobson said GM is well-positioned to benefit from subsidies for electric vehicles in the United States under the Inflation Reduction Act because of its investments in North American batteries, raw materials and electric vehicle assembly.
He said GM has three battery plants in North America, and will announce the location of a fourth domestic battery plant soon.
GM will reduce costs by reducing vehicle complexity, expanding the use of common subsystems between gas and electric vehicles, focusing investment on growth initiatives with near-term benefits and lowering “spending levels across all parts of the company, including travel, marketing, Barra said.
Some analysts have questioned GM’s continued investment in the cruise robo-taxi business. Jacobson said Cruz expands and “does really well.”
(Reporting by Nathan Gomez in Bengaluru, Joseph White in Detroit and David Shepherdson in Washington; Editing by Rashmi Aish, Jonathan Otis and Margarita Choi)