With a salary cut of more than 20%, General Motors still needs to fight against the odds.

According to Bloomberg, on March 27, General Motors told all of its 69,000 salaried employees that it would temporarily cut their wages by 20% to save cash to deal with the new coronavirus crisis. About The 6,500 U.S. employees who cannot work from home will be put on paid leave, will receive $75 salary, maintain seniority and retain health benefits.

In addition, the executive team will reduce cash compensation by 5 or 10% on the basis of deferred salary payment of 20%, excluding bonuses, stock options or other awards. The GM board of directors will reduce salary by 20%. .

The salary reduction from top to bottom is really a helpless move. GM spokesman Jim Cain said in an email, "GM's business and balance sheet were very strong before the coronavirus crisis began, and the steps we are taking now will help ensure that we can continue to operate after the crisis ends." "Restore growth momentum as soon as possible."

However, it is unclear whether this salary cut can maintain cash flow stability. After all, there has been an ongoing dispute between General Motors and the union about layoffs due to cost reductions. . Workers are focused on tangible immediate benefits, while Mary Barra, the head of General Motors, hopes to improve the company's long-term profits and profitability to enhance its ability to withstand adverse factors during the cycle.

General Motors has always been determined on the road to the transformation of the four modernizations and invested a lot of money in this bet about the future. However, the embarrassment of reality is that there are not many paths available to General Motors. Laying off employees and closing factories to reduce costs in exchange for enough financial chips are the most common methods.

However, strikes and protests have continued, and GM’s life is not easy. The days that were originally difficult have now become even worse. As China's auto market suffered a cold winter last year, General Motors' sales in China also experienced a sharp decline. The cumulative sales volume was 1.4633 million units, a decrease of 25.7%. Among them, the three major brands of Chevrolet, Buick and Cadillac have all encountered some difficulties in sales and transformation.

General Motors, which is preparing for a turnaround in 2020, has made a comprehensive contraction in the global market, withdrawing from many markets one after another, laying off employees, closing factories, cutting off non-core businesses, and shrinking its global front. The importance of the United States and China as the core battlefields has once again reached an unprecedented height. However, dreams always seem a bit unlucky in the face of the times.

The Chinese market was severely affected by the new coronavirus at the end of January. As a result, automakers and suppliers around the world were affected by the shutdown and slowdown caused by the new coronavirus. General Motors in the North American market was also affected. No exception, I also feel the pain of this wave of crisis.

Data show that in China, the world’s largest automobile market, the sales of two subsidiaries of General Motors have also declined significantly in the first two months. Among them, SAIC-GM’s sales in the first two months fell by 52% year-on-year to only 13.3%. Sales of SAIC-GM-Wuling dropped by 65% ??in the first two months to only 90,000 units.

As the epidemic continues to spread, the Detroit Big Three plan to extend the suspension of production until April. Ford, FCA and General Motors have said they will suspend production until at least March 30, and the time for resumption of operations is still to be determined. It is an inevitable fact that sales in the first quarter were severely affected. The sluggishness of the front-end market will inevitably lead to the sustainability of cash flow and R&D investment.

Therefore, General Motors had to announce on March 24 that it would withdraw its previously released 2020 financial performance targets, while borrowing US$16 billion from existing credit lines to double its cash reserves to US$32 billion. , to cope with the impact of the epidemic and maintain financial flexibility in an uncertain global market.

According to the financial report released by General Motors in February this year, General Motors’ net income in 2019 was US$137.2 billion, a year-on-year decrease of 6.7%; net profit was US$6.7 billion, a year-on-year decrease of 17.4%. General Motors' stock has lost nearly half its value over the past month.

In addition, Moody's warned General Motors (GM.US) that it may downgrade its rating to "junk" (Ba) due to the impact of the public health incident. In this regard, Maribola, who was deeply under pressure, had to say, "We are actively taking austerity measures to preserve cash and take necessary measures to ensure adequate liquidity in an ever-changing and uncertain environment. "

Of course, General Motors is not the first car company to withdraw its 2020 financial targets. Ford, also from Detroit, has begun a series of reduction measures under the continued impact of the epidemic. , and announced a week earlier that it had withdrawn its 2020 performance target. At the same time, Ford also decided to activate two unused credit lines and actively raise $15.4 billion in additional cash to ensure the company's cash flow is stable.

On the same day as General Motors, Ford CEO Hackett also outlined a cost-cutting plan, which includes stopping hiring new employees and reducing management compensation. Effective May 1, 20-50% of the compensation of Ford Motor Company's top 300 senior managers will be deferred for at least five months.

The plight of the Detroit giants is similar, with similar sorrows and joys. It is still unclear who can get the dragon-slaying skills. General Motors needs to fight against the odds. For now, GM expects these tightening measures to save significant cash, and it has been working to improve its balance sheet since temporarily closing its North American plants.

Although General Motors has made it clear that the salary cuts will be repaid in one go, including interest, before March 15 next year. However, we still need to be vigilant. Workers' protests related to vital interests are particularly fierce. The 40-day strike that occurred in mid-September last year caused an economic loss of US$3.6 billion to General Motors. After GM adjusted its free cash flow in 2019, It dropped by US$5.4 billion to US$1.1 billion, and the afterimage remains.

This is not an isolated case, but something that General Motors has suffered from repeatedly since the implementation of its global downsizing plan, often ending in "succumbing to strikes".

Text/Roomy

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This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.