The first responses to COVID19 from the automotive industry was to shut down factories to protect their workers. Now, they are looking ahead for their financial well-being, and making more tough decisions. According to The Detroit News, GM is cutting the pay of salaried workers by 20 percent, and is suspending production indefinitely. These efforts will hopefully stay any layoff measures in the near future.
In other words, the initial estimates of plants firing up in early April was nothing short of wishful thinking. Michigan, where GM, Ford and FCA are all headquartered, continues to be one of the hardest impacted states in the country, with confirmed cases amounting to nearly 5,000 people and 111 deaths, although true numbers are likely much higher. The situation has gotten so bad that the state has been granted disaster relief aid.
While this shows how impactful the pandemic has been on the industry already, there is also a sign of light at the end of the tunnel. GM’s pay cut will run six months, but the company will repay the losses with an interest of six percent. Repayments are slated to begin late this year or early 2021.
Opposite of General Motors, Ford and FCA that hope to restart production April 14. Thankfully, union backed hourly workforce will be getting around 88% of their paychecks through supplemental pay and unemployment insurance.
There are different specifics for GM’s 40,000 person salaried workforce. Senior executives will have the 20% salary deferral, and 5% less in cash compensation. Senior executives, on the other hand, will only have 10% lopped off their salary numbers. 6,500 salaried engineers and manufacturing employees will make do with 75% of pay, with benefits.
While the sting from GM’s austerity measures will be felt, GM promises to pay all of it back eventually, plus some. This is far better than just cutting pay for salaried workers. GM representatives say that the move will allow the company to rebound quickly after the COVID19 crisis eventually passes.