Detroit — The spreading coronavirus crisis is pushing General Motors Co. to cut its salaried workforce’s pay by 20% for potentially up to six months, a company spokesman said Thursday, but the automaker would pay back the reductions with interest later this year or early 2021.
GM’s cost-cutting action follows Ford Motor Co.’s move to defer portions of salaries for 300 top executives. In a letter to staff, CEO Jim Hackett said he will defer 50% of his salary and Executive Chairman Bill Ford will defer all of his base salary for at least five months starting May 1, though he will continue to receive full retirement benefit contributions during the period.
And Fiat Chrysler Automobiles NV confirmed Wednesday that almost 2,000 contract workers across North America will be out of a job as projects are paused, another indication of the pressure the auto industry is under amid the coronavirus pandemic.
GM has 69,000 salaried employees globally and about 40,000 in the United States. Instead of laying off salaried manufacturing and engineering employees, 6,500 will participate in the company’s salaried downtime paid absence program and will receive 75% of their pay with benefits.
Executives will receive a 20% salary deferral, a 5% reduction in their cash compensation and most senior executives with receive a 10% reduction. GM’s directors also will see a 20% reduction in their board compensation.
“GM’s business and its balance sheet was very strong before the COVID-19 outbreak and the steps we are taking now will help ensure that we can regain our momentum as quickly as possible after this crisis is over,” GM said in a statement.
With production down indefinitely, GM’s union-represented hourly employees are receiving supplemental pay and unemployment insurance that equates to more than 88% of their take-home paychecks. GM told employees Thursday that it would extend production downtime indefinitely while Ford and FCA want to restart production April 14.
GM’s actions come as the Dearborn automaker seeks to preserve its financial flexibility amid declining demand because of the coronavirus. The Blue Oval already has borrowed $15.4 billion to help with losses after last week’s starting a vehicle manufacturing hiatus in Europe, North America and elsewhere. It also suspended its 15-cent quarterly dividend.
Hackett noted the Blue Oval’s efforts do not include layoffs for now. If the effects of the virus are longer or more severe than anticipated, however, the company could take “tougher actions,” he said. He did not specify what expectations are. He added that the company many offer voluntary sabbaticals.
The company also is deferring merit-based salary increases, suspending overtime for salaried workers and freezing hiring of non-critical skill roles. And Ford could reduce work schedules and compensation for jobs that cannot be done effectively away from Ford facilities.
FCA has suspended some development projects because of the outbreak. On Thursday, it also said it is borrowing $3.8 billion for a one-year term that can be extended for an additional six months. This is in addition to existing credit facilities of $8.4 billion. It already has started to draw down from a bilateral credit line worth of $1.7 billion.
khall@detroitnews.com
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