GM changes its bonus plan for salaried workers in 2024: What new formula means

General Motors is changing how it determines bonuses for salaried employees going forward, leaving some worried it will mean smaller payouts.

Starting this year, the automaker will include the performance of electric vehicles, software and services, and autonomous vehicle programs in the formula that determines the payout white-collar workers receive around this time of the year, according to a document obtained by the Detroit Free Press and two people familiar with the program. All three of these areas have been challenges for GM in recent months.

The move is a dramatic shift from the previous formula where the bonus was completely based on GM's annual earnings before interest and taxes (EBIT) and its free cash flow, according to the two people, who requested anonymity because they were not authorized to speak to the news media about it.

GM's EBIT and free cash flow results are largely driven by strong sales of gasoline-powered pickups and large SUVs, which carry fat profit margins. GM's adjusted EBIT for 2023 was down 15% to $12.4 billion in part due to the United Auto Workers strike last fall halting some production and GM taking charges related to its battery supplier contracts and stored EV inventory. GM generated $11.7 billion in automotive free cash flow for 2023. Free cash flow is the cash GM makes after accounting for costs to support operations and maintain its capital assets.

The two people told the Free Press that GM surpassed its 2023 performance targets in those areas. Many people will be cashing five-figure bonus checks.

New rules to match new goals

The bonus program for GM's hourly employees is different from that for salaried workers. The hourly profit-sharing plan is based on a negotiated formula with the UAW. It is $1,000 per every $1 billion in annual EBIT, or pretax profits for North America. About 45,000 U.S. hourly workers will receive a profit-sharing check of up to $12,250 for last year, GM reported last month.

But in the notice for salaried employees on Jan. 30 and obtained by the Free Press, GM said, "As we navigate through a fast-paced business transformation, it is crucial we stay focused on our business deliverables and strategic objectives, and continue to hold ourselves accountable. Beginning with the 2024 performance year, GM's variable compensation structure will be aligned more closely with the company's four strategic objectives: Internal Combustion Engine (ICE) vehicles, Electric Vehicles (EVs), Software and Services (S&S), and Autonomous Vehicles (AVs)."

That means 60% of the bonus will be based on GM's EBIT and free cash flow results and the other 40% now will include EV production targets, software and services and self-driving car business targets, the people said.

When asked about the change, GM spokeswoman Tara Kuhnen said in an email to the Detroit Free Press, "Our bonus plans have evolved over time to match business needs and align more closely with our strategic goals. Our goal is to incentivize everyone to think and act with an enterprise perspective."

In other words, GM, like many businesses, is incentivizing people to work on the areas it wants to improve.

Kuhnen declined to provide specifics on how GM will measure the new targets because it is proprietary information.

Blurry targets create jitters

For some white-collar workers, the vague targets create anxiety.

"Many, if not most, are concerned," said one of the employees who spoke to the Free Press. "It’s unclear what exactly those goals are and how they will be measured, but none of those things went well in 2023."

GM struggled with its launches of new EVs, issued stop-sale orders on some electric and gasoline vehicles due to software issues and halted operations of its self-driving subsidiary Cruise after an autonomous car hit a pedestrian resulting in various investigations and potential fines. GM paused building the Cruise Origin, a small bus-like vehicle with no steering controls or pedals, at Factory Zero in Detroit and Hamtramck.

Under the 2023 formula, bonuses to salaried workers are being paid out at 130%, both people confirmed. That means GM has exceeded its business performance targets. If GM hits its targets, bonuses are paid at 100%. If it misses the target, then the bonuses are paid at a rate under 100%.

All job levels at GM have a personal base bonus percentage, the people said. For example, some job levels pay out a bonus at 10% of a person's salary, a higher level might pay out 13%, and an even higher level would be 18%. For a person earning $100,000 a year at 13% bonus, they would receive $13,000 if GM paid out at 100% that year. It is paying out at 130% this year, so that bonus would be about $16,900.  

The median pay for GM's global employees in 2022 was $80,034, according to a government filing by GM last year. That's up from $69,433 in 2021.

GM's problems last year

CEO Mary Barra has said she was disappointed with the launches of GM's new EVs last year, blaming battery module production problems for a slow rollout that resulted in GM selling 13,938 of the new EVs for the entire year, including commercial electric vans from its BrightDrop unit. Its biggest-selling EV was the Bolt at 62,045, which uses older battery technology. For the full year, GM sold 2.6 million new vehicles compared with 2.3 million new cars sold in 2022.

Barra said the automaker has fixed the battery module assembly problem and she vowed that GM will have better EV launches this year. However, GM has holds on launching some of its key EVs, including the Chevrolet Equinox EV and its electric pickups, a move that prompted CFO Paul Jacobson to say on Wednesday is necessary for GM to ensure customers receive high-quality EVs, which GM expects to make profitable later this year.

GM has grappled with software glitches in some vehicles. In December, it put a stop-sale on its new Chevrolet Blazer EV until it can find a fix. Earlier this week, GM put a stop-sale on its midsize gasoline-powered pickups due to software issues, but lifted the hold a day later when it found a solution.

Then there are the problems at Cruise after a modified, self-driving Chevy Bolt struck a pedestrian on Oct. 2 in San Francisco and dragged her 20 feet, resulting in critical injuries. Cruise halted its operations in San Francisco, Austin, Texas, and Phoenix. Cruise has since fired nine executives and cut about 24% or 900 full-time employees from its workforce. Cruise CEO Kyle Vogt and cofounder and Chief Product Officer Dan Kan have resigned, and GM has scaled back its investment in Cruise by $1 billion this year compared with last year. GM is facing a U.S. Justice Department investigation, though GM still supports Cruise's mission.

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Given all that, one of the people said many wonder what the bonuses would have looked like for 2023 had the new metrics been applied to last year.

"The bonuses can be very significant, and there is a lot of concern over the new payout metrics," the person said.

Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.