General Motors has announced they will offer voluntary buyouts to a “majority” of its U.S. salaried employees. This comes just a week after GM said it would terminate about 500 salaried positions globally.
The buyout offer is part of GM’s effort to reach a total of $2 billion in structural cost savings over the next two years. Of which, they expect 30%-50% of that cost savings to occur in 2023. The “Voluntary Separation Program,” or VSP, is expected to accelerate attrition in the U.S. and to help avoid involuntary separations.
The last time GM offered such a large buyout program was in 2018. Any GM employee with five or more years of experience as of June 30th will be eligible to apply. U.S. employees who are approved for the buyout will be granted one-month pay for every year they worked up to 12 months, as well as COBRA health coverage. Those employees who are approved will also receive a prorated teamGM at target for the 2023 performance year, paid as a lump sum. Employees have until March 24th at noon to express their interest. Upon review from management, those approved will be provided with a determination no later than March 31st. The expectation for those who are approved will leave no later than June 30th of this year.
What does this mean for GM employees? 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 is currently voluntary. If it is met with positive feedback, it could offer opportunities to its more senior workforce. However, if the VSP is not deemed successful by GM, meaning there aren’t enough employees who voluntarily take a buyout, then they may turn to layoffs or involuntary separations to meet their target cost-savings. 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.
The bottom line is no one can predict the future, whether you’re a GM employee who has been offered a severance package and is not sure how to proceed. The success of this program is yet to be seen, and the potential opportunities are unknown. The best that any employee or financial planner helping their GM clients can do is gather the information, consider the risks, understand potential rewards, and make an informed decision.
At FSG, our team of educated advisors, including three CFPs, five ChFCs, two CIMAs, two MSFS, and two CDAAs, 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.
Written by: Kyle Cooper
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