GM plans $2 billion in cost cuts after record 2022 earnings

General Motors on Tuesday said it will make $2 billion in cost cuts over the next two years, partly by reducing the size of its work force, though it’s not planning any layoffs.

It announced the plan after posting fourth-quarter net income of $2 billion — a 15 percent increase, and a record pretax profit for the year as vehicle sales and supply constraints improved.

The automaker also said in a statement Tuesday it expects to generate similar or slightly lower earnings in 2023.To achieve that, it intends to cut costs in its automotive business by $2 billion through 2024, with 30 to 50 percent of that expected this year, CFO Paul Jacobson told reporters.

In the fourth quarter, GM said revenue surged 28 percent to $43.1 billion. Adjusted earnings before interest and taxes in the quarter rose 34 percent to $3.8 billion.

GM said its full-year EBIT of $14.5 billion, up 1.3 percent, was a company record. Its net income for all of 2022 slipped 0.8 percent to $9.9 billion as revenue rose 23 percent to $156.7 billion.

GM’s fourth-quarter adjusted profit in North America soared 69 percent to $3.7 billion.

Shares in GM rose 8 percent to $39.17 in early trading on Wall Street.

“GM led the U.S. industry in total sales and delivered the largest year-over-year increase in market share of any OEM, thanks to strong demand for our products and improved supply chain conditions,” CEO Mary Barra said in a letter to shareholders. “We expect that our momentum will help us deliver strong results once again in 2023.”

GM plans to reduce complexity in its products and trim corporate expenses, with plans to slightly lower head count through attrition, Jacobson said. He declined to say how much the company would shrink its workforce.

“I want to be clear: We’re not planning layoffs,” Jacobson said. “We’re looking at hiring the only most strategically important roles, and we will use attrition to help manage our overall head count.”

GM projects full-year net income ranging from $8.7 billion to $10.1 billion and adjusted EBIT of $10.5 billion to $12.5 billion.

Jacobson told reporters that this year’s earnings will be impacted by an expected decline in GM Financial’s earnings as a result of declining used-car prices, rising interest rates and a smaller lease portfolio, as well as a pension accounting impact.

“We think the underlying business is going to be pretty consistent in ’23 with what we saw last year, and I think that’s a slightly more bullish statement than where most of the market is,” Jacobson said. “We’re going to continue to watch it. But clearly, as we talked about with the $2 billion cost program we’ve announced today, we want to make sure that we’re cautious and prepared for going forward.”

GM said its profit-sharing payout to unionized U.S. employees is $500 million, a record. The company’s UAW-represented hourly workers each will receive bonuses of $12,750 based on its $12.99 billion profit in North America for the year, the union said in a statement.

This story will be updated.