General Motors Co. is on track to save $4.5 billion by 2020 through its restructuring plan, with $1.1 billion saved in the first half of 2019, the automaker's CFO said during an Aug. 13 presentation at the JP Morgan Auto Conference in New York.
GM CFO Dhivya Suryadevara said the company reduced its workforce and decreased sedan production to refocus on electrification and autonomous vehicles, as well as position itself against a potential recession. In November 2018, the Detroit-based automaker announced that it was cutting 14,000 jobs across its blue-collar and white-collar workforce in North America and closing plants in Ohio, Michigan, Maryland and Canada.
"What we wanted to do was to right-size and continually look at the fixed cost opportunities, fixed cost business," the CFO said. Improving the operating leverage of the company will help GM reinvest in future businesses while making the core business more resilient, Suryadevara added.
Even though the company is well-positioned for a potential economic downturn, executives do not see it as imminent, the CFO said, noting that GM is running models to predict how different scenarios could impact the company.
If a 25% drop in spending occurred, for example, GM's EBIT would be impacted by approximately 60% or 70%, Suryadevara said.
In addition to the automaker's expected savings, GM is on track to refocus its capital spending to $7 billion in 2020, down from an $8.5 billion run rate over the past several years, the CFO said.
GM will use some of the $7 billion to invest in the automaker's advanced technology efforts, including electric and self-driving vehicles.
"We're in the sweet spot now from an internal combustion engine standpoint that we've cycled past the major investments that we need to make from an architectural standpoint," Suryadevara said. "So if you think about the investments that have already been made, it's allowing us to refocus the $7 billion of capital spend that we have towards some of these electrification and other future initiatives."