GM halts two renovation projects as it looks to cut costs

WASHINGTON (Reuters) – General Motors Co is halting work on two renovation projects at facilities in the Detroit area as it offers voluntary severance packages to 18,000 salaried workers in North America.

GM chief executive Mary Barra told salaried workers in an email Wednesday seen by Reuters that the automaker has “decided to postpone the new studio building of the Design Center and stop the Pontiac Propulsion workplace transformation”.

Automotive News reported Thursday the projects were expected to cost hundreds of millions of dollars. A GM spokesman declined to say what the cost savings or when GM may decide to resume the renovation projects.

GM’s “structural costs are not aligned with the market realities nor the transformational priorities ahead. We must take significant actions now to address this while our company and the economy are strong,” Barra added.

The largest U.S. automaker on Wednesday offered six months of severance pay to 18,000 of its 50,000 salaried workers in North America who have 12 or more years’ experience. Employees have until Nov. 19 to decide if they will seek to leave.

“We need to get ahead of headwinds, rather than let them happen to us. And we need to do all of that against a backdrop where those outside our company are skeptical of our ability to manage through an eventual downturn in the economy – skepticism we see in our stock price, which has recently been trading below our initial public offering price,” Barra said.

GM shares closed down 0.3 percent Thursday to $36.47 after rising nearly 9 percent Wednesday.

Barra added that having a strong cash position helps with external factors like “trade, market uncertainty and foreign exchange. Without a strong cash position, we cannot be the agile, innovative industry leader we need to be.”