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Streamlining operations and refocusing on efficiency is an overarching tech theme of 2023, epitomized by Meta CEO Mark Zuckerberg last month when he declared this would be the company’s “year of efficiency.” But the auto industry is also making moves to become leaner and meaner as the electric vehicle revolution beckons—even if it means slashing jobs.
General Motors, one of the country’s largest and oldest car companies, is kicking off its own path to efficiency and cutting expenses this year, starting with reducing hundreds of executive-level and salaried jobs, the company told staff.
“This week we are taking action with a relatively small number of global executives and classified employees following our most recent performance calibration. They will be departing the company starting from today,” Arden Hoffman, chief people officer at GM, wrote in an internal memo sent to employees on Tuesday, reviewed by Fortune. News of the job reductions was first reported Tuesday by The Detroit News.
The total number of job reductions may number around 500, CNBC reported Tuesday, citing a person familiar with the plans. A GM spokesperson declined to confirm to Fortune the specific number of job reductions, although they said it constituted a “relatively small” share of the company’s 81,000 global employees.
The internal announcement echoed statements made by company executives during GM’s fourth quarter earnings call in January. GM CEO Mary Barra and CFO Paul Jacobson said at the time that the company was embarking on a $2 billion cost-cutting plan over the next two years to streamline operations and improve efficiency, of which up to half was planned for 2023. However, at the time Jacobsen said that GM was “not doing layoffs” as part of this plan.
Auto industry’s efficiency push
Job reductions at GM and its larger cost-cutting measures are likely the first of many changes at the company as it attempts to set itself up for success in the years to come.
A GM spokesperson told Fortune Wednesday that “2023 is a critically important year for GM. We are executing multiple global product launches that will shape our company and industry for decades to come.”
Part of the reason behind GM’s push to streamline operations and cut costs is to stay competitive with other companies, as the car industry as a whole sets out on a path to make significant changes.
“We are looking at all the ways of addressing efficiency and performance,” Hoffman wrote in Tuesday’s memo, adding that the company required a larger “culture shift” that would improve performances and enable GM to keep up with other carmakers.
“In an environment where our competitors’ margins are improving, it’s imperative that we act now and focus on our own efficiency,” he said. “Working together, we are going to win.”
Ford, another stalwart of American automaking, is pursuing a similar path of cost-cutting and efficiency-seeking. Ford laid off around 3,000 employees worldwide last August, and during its earnings call last month, CFO John Lawler said the company has drafted a cost-saving plan worth $3 billion a year, with two thirds of that coming down to streamlined operational costs.
Ford’s fourth quarter earnings were below expectations and reported a net loss for 2022, which the company attributed to “execution issues” hampering operations. Ford CEO Jim Farley hinted at more layoffs in a February interview with SiriusXM, while also expressing concern over the company’s ability to keep up with other car companies.
“It takes us 25% more engineers to do the same work statements as our competitors,” he said. “I can’t afford to be 25% less efficient.”
Unlike Ford, GM reported record earnings last month. But both companies as well as their competitors around the world—including Volkswagen, Nissan, and Honda—are steeling themselves for a more cut-throat business environment in the years ahead as carmakers race to accelerate their electric vehicle plans.
GM may be further ahead than Ford, its main domestic competitor, in this respect. Last month, the company agreed on a $650 million investment in a company planning a new mine in Nevada above the country’s largest known reserve of lithium, a critical component in electric vehicle batteries. Also last month, GM announced it would spend $35 billion more than planned between now and 2025 on speeding up EV launches, implying that it was prepared to sacrifice short-term profits to accelerate EV rollouts.
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