On January 31, 2023, General Motors Company (the “Company”) announced its intention to implement a cost reduction program to reduce fixed costs by $2.0 billion on an annual run rate basis by 2024 (the “Program”), with 30% to 50% of these savings expected during 2023 and the full amount expected in 2024. The Program is expected to drive cost efficiencies by (i) reducing vehicle complexity and expanding the use of shared subsystems between existing internal combustion engine and future electric vehicle programs, (ii) focusing investment in growth initiatives to accelerate near-term benefits, (iii) decreasing discretionary spending across substantially all parts of the Company, and (iv) reducing salaried staff through attrition, primarily in the United States.
On March 9, 2023, as part of the Program, the Company announced a voluntary separation program (“VSP”) in an effort to accelerate the normal attrition process and the resulting cost savings. Under the terms of the VSP, eligible employees who choose to leave the Company will be offered a combination of lump sum payments and other compensation based on their years of service. In connection with the VSP, the Company expects to incur up to $1.5 billion of pre-tax employee separation charges, which will be substantially all cash-based, and up to $300 million in pre-tax, non-cash pension curtailment charges. The final amount of the charges will be based on the composition of employees who elect to participate in the VSP. The Company anticipates that substantially all of these charges will be considered special for EBIT-adjusted, EPS-diluted-adjusted, and adjusted automotive free cash flow purposes. The Company expects to incur the majority of these charges in the first half of 2023, with some additional costs incurred throughout the remainder of the year, and to make substantially all of the cash payments by the end of 2023.
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