GM puts generous buyout on the table: What salaried workers should consider

An ordinary Thursday turned into a day of uncertainty and confusion when General Motors salaried workers heard that voluntary buyouts, which some dub as generous offers, were suddenly on the table.

Anyone who wants to go has until noon, Eastern time, March 24, to decide. Yes, we’re talking about just two weeks here to figure out if you’d stay or go.

The good news is that Thursday's news wasn't another sudden layoff. GM announced job cuts in late February. Now, it's offering a voluntary buyout to salaried workers. Hourly employees are not eligible.

“Right now, it’s a voluntary package, so it’s only an opportunity,” said David Kudla, CEO of Mainstay Capital Management in Troy.

A chance to consider if you want to switch careers, take your talents elsewhere, or even retire.

GM makes buyout look tempting

Kudla calls the deal on the table a “pretty good package.” Someone who has been with the company 12 years or more is looking at a maximum of 12 months in severance pay.

“We got a lot of calls today,” Kudla said Thursday afternoon, shortly after the big news on the GM buyouts broke.

Getting a year of severance could be very tempting for many who have been with GM for a while. And some predict that there could be plenty of takers — and not just those who are close to retirement.

GM has communicated a message that it needs to get leaner as the industry pushes to expand electric vehicle sales. The automaker wants to accelerate attrition and achieve $2 billion in cost savings by the end of 2024.

"Employees are strongly encouraged to consider the program," said GM spokesperson David Barnas.

"By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market.”

On a rough day on Wall Street, auto stocks took a bigger hit. GM stock closed at $37.82 a share Thursday, down $1.94 a share or 4.88%. The Dow Jones Industrial Average closed at 32,254.86 points, down 543.54 points or 1.66%.

Phones start ringing

Financial advisers like Sam Huszczo said their phones started ringing off the hook Thursday once GM told salaried workers about the buyout packages to reduce its costs and workforce.

"A rich offer like this is showing that they're serious about that strategy," said Huszczo, a chartered financial analyst in Southfield.

Some employees might be surprised to hear about a buyout now, he said, because often automakers have rolled out such deals around August or September. The news of the latest buyout comes early in the year. And it's got some real money behind it.

"This feels like GM is just trying to throw money to solve this issue at the moment. And it will give a nice transition to the people who take it," Huszczo said.

The latest GM offer, Huszczo said, is better than a voluntary buyout back in 2018 when a GM employee with 12 years of service was offered just six months in severance. In 2018, financial planners said, clients saw offers of up to six months of severance, including health care coverage during that time. Those on the executive level received one year of severance in 2018, planners said. 

The 2023 offer is being made to all U.S. salaried employees with five years or more of service as of June 30, 2023. A buyout offer is being made to all GM global executives with at least two years of service.

GM said it is offering three packages based on level and service to the company.

"This GM offer is a good offer," said Huszczo, who has reviewed auto buyouts for clients for several years.

"It doesn't mean everybody should take it. But it is an offer that I think is better than what we've seen in the past."

Some details of the deal

GM’s Voluntary Separation Program, based on a memo obtained by the Free Press and sent to U.S. salaried workers Thursday, includes the following:

• Severance: “One month of pay for every year of service up to 12 months of pay, paid as a lump sum,” according to the GM memo.
• Some money for health coverage: “Employees enrolled in the company’s group medical plan will receive an additional lump sum payment that equals their monthly cost to continue group health benefits under COBRA, for every year of service up to 12 months,” the memo stated.
• Keeping some bonus cash: The bonus would be pro-rated for the 2023 performance year, paid as a lump sum, according to the memo.
• Help looking for work: “Outplacement assistance, if requested, for 3 months.”
• They can keep the car for a little while. GM’s memo said: “Most company vehicle drivers may retain the use of their company vehicle until their final day of employment or April 28, 2023 (whichever comes later), with some exceptions.” The employee is going to be responsible for all fuel expenses and maintenance once they are no longer actively working.

GM said all global executives with at least two years of service are eligible for a package that includes base salary, incentives, COBRA and outplacement services.

As with any buyout offer, GM employees must think carefully about their next move.

Will a buyout work for you?

Kudla said leaving voluntarily and accepting the severance package can make sense for someone who is looking to leave GM anyway in the next year or so.

Or it can work for someone who is financially and emotionally prepared to retire soon. Kudla's firm is offering to email a report to those considering a buyout called “Separating From GM” if they sign up at www.mainstaycapital.com.

Kudla said it's hard to speculate whether more layoffs and job cuts would be ahead at GM. Instead, he suggested that employees considering a buyout look at their own balance sheets. When it comes to all buyout packages, Kudla said, it's important that employees view those offers within the context of their own financial plan.

More:GM job cuts leave some employees distraught, analysts unimpressed

More:GM to make more job cuts, trim costs with voluntary separation offers

More:1,000 salaried Ford workers retire after pension warning from automaker

More:What Ford salaried workers saw as a payout in latest layoffs

Tough discussions ahead in next few days

Everyone’s situation is going to be different. Some GM employees may have children still in college. Others might have just bought a brand-new home. And, yes, many fear what could happen if they don’t take the buyout and opt to stay at GM.

Could they be laid off in the future? Are they prepared to find another job? If they’re considering retiring, are they ready to move onto the next chapter? What kind of savings will they be able to tap into as they go forward?

Are they prepared if there is a recession ahead in the next year or so?

Many times, these sorts of offers or situations have a limited window, which can trigger some emotional upheaval.

Some might feel rushed now because the offer is better than what's been available to others who faced layoffs.

The severance payout that Ford offered salaried workers who were laid off last year was less generous.

The maximum payout for laid-off salaried employees at Ford in late August was nine months for those who had 20 years or more with the company, plus medical coverage during that time.

Someone with 10 years to 11 years of service at Ford, for example, saw four months of pay in a lump sum as part of their severance and six months of health care coverage.

Huszczo said it's important to take a hard look at the data — and various scenarios for your future ― before making any decision. How much debt are you carrying? How likely is it that you can you easily move forward elsewhere?

Having a choice on what to do next is far better than being shown the door.

Even so, you cannot make a big move just because you're worried that another round of layoffs is ahead. Or allow the emotional roller coaster to get the better of you simply because a decision is needed in just a few weeks.

Contact Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer.