DETROIT — General Motors is freezing work on some vehicle programs and will temporarily reduce paychecks for all salaried employees globally by 20 percent to conserve cash as it weathers the coronavirus outbreak. But the automaker is promising to make up for the lost income within a year.
In addition, 6,500 salaried workers in the U.S. — mostly people in engineering and manufacturing functions who cannot work remotely — will be placed on leave and receive 75 percent of regular pay during the downtime.
General Motors CEO Mary Barra and CFO Dhivya Suryadevara told employees Thursday the company needed to take immediate, aggressive steps to cut costs.
Suryadevara warned on a webcast, "If we don’t take significant austerity measures, we will do serious damage to the long-term viability of our company," according to a recording reviewed by Reuters.
Suryadevara noted that GM has very little revenue coming in, “and we are preparing to operate the company temporarily on credit if necessary."
In an email to employees Thursday, Barra said GM for years has been making "difficult decisions to strengthen our business and make it more resilient," and now those moves "will be put to the test," Reuters reported.
Barra told employees the largest U.S. automaker is "aggressively taking costs out of the business wherever we can by suspending work on some product programs and cutting our marketing budgets and hundreds more actions."
While some vehicles under development will be delayed, models close to launch such as the redesigned Chevrolet Tahoe, GMC Yukon and Cadillac Escalade large SUVs will go on sale this year as scheduled. The company is also sparing a Cadillac electric SUV and Cruise Origin self-driving vehicle from delays, a spokesman told Bloomberg.
"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," the company said in a statement Thursday.
The pay deferments will start April 1 and potentially could last about six months, GM spokesman Jim Cain said.
Employees will receive lost earnings in a lump-sum payment no later than March 15, 2021, GM said.
The move will result in "significant" immediate cash savings, but GM declined to be more specific. The company has about 69,000 salaried employees, making up about 42 percent of its global work force.
Executives will see deeper pay cuts on top of the unilateral 20 percent deferment, resulting in a total reduction during the crisis of 30 percent for senior leadership and 25 percent for other executives. Pay for GM's board of directors will be cut 20 percent and not repaid.
Employees' health care benefits will not be affected.
Earlier Thursday, Ford Motor Co. said top executives will be subject to 50 percent pay cuts, and Executive Chairman Bill Ford deferred his full salary for at least five months.
CEO Jim Hackett said Ford would defer merit-based salary increases, suspend overtime for salaried workers and freeze hiring for noncritical positions. He said work schedules and pay might be "temporarily reduced" for workers whose jobs cannot be done from home and that others may be offered voluntary sabbaticals.
Reuters and Bloomberg contributed to this report.