Risks and Opportunities for the 2018 GM Buyouts

Shortly after releasing a strong third-quarter earnings report for 2018, GM sent correspondence to 50,000 of its employees that the company will be offering a voluntary severance package. The package is being offered to about 18,000 salaried employees who have 12 years or more experience.

The buyout offer is part of GM’s effort to reach a total of $6.5 billion savings in cost efficiencies by the end of 2018. In a statement to Detroit Free Press, GM’s CFO Dhivya Suryadevara disclosed that the company had already hit $6.3 billion of these savings by the end of the third quarter 2018.

What does this mean for GM employees and its investors? From a financial planning standpoint, there are two sides to this sword, and they aren’t necessarily mutually exclusive. Understandably, this program may provoke some uncertainty for employees, but keep in mind the program currently is voluntary. If it is met with positive feedback, it could offer opportunities to its more senior workforce. However, if the program is not deemed successful by GM, meaning there aren’t enough employees who voluntarily take a buyout, then they may turn to layoffs to meet their target cost-savings for this program. So GM employees who have been offered the buyout have a tough decision to make. Essentially, affected employees can either receive a severance package and take the opportunity for a career change or early retirement, OR refuse the voluntary buyout and potentially face the uncertainty of layoffs. This decision is not one that is easily made.

For investors, the story is much more simple. GM has spent the last two years hiring almost 17,000 new workers, has invested $1 billion in renovations for its offices, and so far has done a good job reaching their target cost savings for 2018. This program has a simple goal, offer a severance package to more “expensive” employees to make room for a newer, less costly, workforce. And when paired with a recent healthy earnings reports, the added cost savings could make GM attractive to potential investors.

The bottom line is no one can predict the future, whether you’re a GM employee who has been offered a severance package and not sure how to proceed, or if you’re an investor and get nervous when you see “GM” and “buyouts” in the same headline. The success of this program is yet to be seen and the potential opportunities are unknown. Economic indicators show that there are job opportunities out there and potentially more growth to be seen on your investment portfolio, but those rewards also come with risk. So the best that any employee, investor, or financial planner can do is gather the information, consider the risks, understand potential rewards, and make an informed decision.

At FSG, our team of advisors are here to help you with life-changing decisions such as taking buyouts or retiring earlier than anticipated. Please feel free to reach out to us and allow us to help guide you through these unanticipated changes. We look forward to working with you.

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This article is written by Kyle Cooper.