GM lays off more than 1,000 salaried software and services employees

 

General Motors Co. is laying off more than 1,000 salaried employees in its software and services organization globally — including more than 600 employees working at its Global Technical Center in Warren — to streamline the division's operations under new leadership.

This comes as GM has been rethinking its software strategy after struggling with issues since launching several new EVs. Most recently, the automaker recalled more than 20,000 electric Cadillac Lyriq all-wheel drive SUVs for a software glitch that could cause the anti-lock braking system to falsely activate, increasing the risk of a crash.

Earlier this year, GM placed a stop-sale order on the electric Chevrolet Blazer because of a software problem. The Lyriq and GMC Hummer EV have had other software issues that required recalls, marring highly anticipated launches.

In a statement Monday, GM spokesperson Kevin Kelly said as the company builds its future, it "must simplify for speed and excellence, make bold choices and prioritize the investments that will have the greatest impact. As a result, we’re reducing certain teams within the Software and Services organization. We are grateful to those who helped establish a strong foundation that positions GM to lead moving forward."

GM declined to confirm how many employees staff its software and services teams in the United States or worldwide. The layoffs signal the Detroit automaker's intensifying focus on the software embedded in new vehicles and come after GM executives in June put Apple Inc. veterans Baris Cetinok and Dave Richardson in charge of the organization. Armed with years of Silicon Valley tech experience, both joined GM in September 2023.

Cetinok and Richardson took over GM's software organization after former leader Mike Abbott left GM in March 2024 due to health reasons. Cetinok and Richardson work out of GM's new Mountain View Technical Center in California.

Cetinok has more than 25 years of experience in product, engineering, and design at companies including Apple, Amazon.com Inc., and Microsoft Corp. Richardson worked at Apple for 12 years as an engineering leader responsible for driving innovation and efficiency in infrastructure for services including iCloud, FaceTime, and Siri. 

GM isn’t alone in having software problems. Rivals Volvo Cars, Volkswagen AG, and Tesla Inc. all have been there, underscoring just how vital properly operating software can be for customers accustomed to using technology that is reliable.

"A big part of the challenge legacy automotive companies, both automakers, and suppliers, have faced has to do with their organizations and their processes that were not really set up for modern automotive software development," said Sam Abuelsamid, principal e-mobility analyst at market research firm Guidehouse Inc.

"They've been doing software for decades, but the nature of software development has fundamentally changed in recent years, and developing modern software-defined vehicles is a much more complex process than it has been in the past."

In total, 634 employees at GM's Technical Center in Warren received layoff notices, according to GM's Worker Adjustment and Retraining Notification or WARN filing. The employees no longer reported to work beginning the week of Aug. 19 but will continue to be employed until Sept. 3 and "will receive a payment equivalent to their wages and benefits as if they were employed" through Oct. 18, the filing states.

Warren Mayor Lori Stone could not be reached for comment through the city's communications department on Monday. But a spokesperson for the Michigan Economic Development Corp., Otie McKinley, said the agency "will continue to work closely with General Motors to ensure the company’s future in Michigan is strong and to collaborate around connecting those impacted by today’s announcement."

Outside of the Warren operation, where GM employs more than 20,000, affected employees also work in California, Austin, Texas, Canada, and elsewhere.

Dan Ives, analyst at Wedbush Securities Inc., said GM executives are trying to get their "arms around an evolving demand and cost structure. Wall Street doesn't want uncertainty and they'd rather GM cut proactively where they can without strategically changing the business. GM's navigated headwinds much better than Ford and Stellantis, but they need to stay nimble in terms of the broader EV strategy, which continues to be in flux."

GM and other automakers are trying to reduce costs while spending billions on new EV launches and keeping their internal combustion engine lineups fresh. Last year, GM CFO Paul Jacobson said in April about 5,000 salaried workers took buyout offers announced earlier in 2023.

The automaker is on track to achieve $2 billion of net fixed cost savings by the end of this year, Jacobson said on GM's second-quarter earnings call in July. That's when GM reported record revenue in the quarter of $47.9 billion and net income of $2.9 billion.

Crosstown rival Stellantis NV is also working on cost-cutting with buyout offers to salaried employees. Stellantis has not said which functions would be targeted for reductions or how many of its 11,000 U.S. salaried employees would receive buy-out offers. The buyouts came after the makers of Chrysler, Dodge, Jeep, and Ram reported earning $6.1 billion, down 48% for the first six months, on net revenues of $92.2 billion, which was off 14% compared to a year earlier.

AMD (AMD.O), opens new tab said on Monday it plans to acquire server maker ZT Systems for $4.9 billion as the company seeks to expand its portfolio of artificial intelligence chips and hardware and battle Nvidia (NVDA.O), opens new tab.

AMD plans to pay for 75% of the ZT Systems acquisition with cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments as of the second quarter.

The computing requirements for AI have dictated that tech companies string together thousands of chips in clusters to achieve the necessary amount of data crunching horsepower. Stringing together the vast numbers of chips has meant the makeup of whole server systems has become increasingly important, which is why AMD is acquiring ZT Systems.

"AI systems are our number one strategic priority," AMD CEO Lisa Su said in an interview with Reuters.

The addition of ZT Systems engineers will allow AMD to more quickly test and roll out its latest AI graphics processing units (GPUs) at the scale cloud computing giants such as Microsoft (MSFT.O), opens new tab require, Su said.

"The main way (ZT Systems) is additive to the company is we sell more GPUs," Su said.

AMD's shares rose more than 2%, while Nvidia rose 1.4%.

"No doubt this gives them much stronger lock-in with their data center customers, and because of that,(the acquisition) is a net positive for their long-term revenue strategy," said Creative Strategies CEO Ben Bajarin.

AMD plans to break off its server manufacturing business and sell it once the deal closes, as it has no plans to compete with companies such as Super Micro Computer (SMCI.O), opens new tab, Su said.

AMD has not yet held talks with potential buyers.

ZT Systems Chief Executive Frank Zhang will join AMD and report to AMD's data center chief, Forrest Norrod.

The closely-held ZT Systems has roughly 2,500 employees and AMD said it plans to retain about 1,000 of them, which will result in about $150 million in annualized operating expenses.

Currently ZT Systems generates annual revenue of roughly $10 billion, most of which is derived from its manufacturing unit.

Executives expect the deal to close in the first half of 2025 and expect an additional 12 to 18 months to sell the manufacturing business.

AMD said it expects the deal to contribute to its adjusted financial performance by 2025-end.

CFO Jean Hu said the minor dilution from the deal in the first year after closing in 2025 would be offset by greater sales of graphics processor units, creating a break-even effect for the deal. In 2026, the acquisition will accelerate revenue growth, Hu added.

"The sale of the (ZT Systems) manufacturing business will have no impact onto AMD in the long run," said Kinngai Chan, a managing director at Summit Insights.

Chan added the deal could help expand its business catering to cloud customers. "Having more engineers helps," he said.

Nvidia CEO Jensen Huang said at the company's developer conference in March that the one-time chip designer now creates and sells entire data centers, or the individual components needed to build one. This year analysts expect the company to generate $105.9 billion from its data center segment, which includes chips and other AI hardware.

Su said last month the company expects to collect roughly $4.5 billion worth of AI chip revenue this year. The company's customers include Microsoft and Meta Platforms (META.O), opens new tab.