News Nov 30, 2023 12:50 AM EST

GM Boosts Shareholder Returns Amidst Labor Challenges

By April Fowell

On Wednesday, General Motors unveiled a major stock buyback program, doubled its dividend, and informed investors that it can withstand additional labor costs from a six-week autoworkers strike.

The Detroit automaker says it lost 95,000 vehicles due to United Auto Workers walkouts, costing it $1.1 billion. However, because of $2 billion in yearly efficiency gains and cost savings planned by the end of next year, the corporation stated that it can withstand $9.3 billion in labor cost hikes from US and Canadian union contracts until April 2028.

GM Boosts Shareholder Returns Amidst Labor Challenges
(Photo : by Mario Tama/Getty Images)
On Wednesday, General Motors unveiled a major stock buyback program, doubled its dividend, and informed investors that it can withstand additional labor costs from a six-week autoworkers strike.

General Motors' 2024 Budget and Long-Term Strategy

CEO Mary Barra stated in a prepared statement that the company is in the process of finalizing a 2024 budget. This budget aims to completely cover the additional expenses associated with the new labor agreements.

Barra emphasized that the long-term strategy involves decreasing the capital intensity of the business, enhancing product development efficiency, and continuing to lower both fixed and variable costs.

The agreements, according to GM, would hike car costs by $500 next year and $575 by the conclusion of the contracts, although experts think competition will restrict the company's ability to raise prices.

Despite record earnings and cash flow, Barra termed GM's stock price "disappointing to everyone" on a conference call with analysts. She claimed the shares, which were trading about $28 before Wednesday, were priced 15% below the company's initial public offering price when it emerged from bankruptcy in 2010.

The business announced intentions to repurchase $10 billion in shares over the next year, representing about one-quarter of its $44 billion market value, with $6.8 billion arriving immediately. According to a GM representative, depending on predicted price hikes, the stock repurchase will amount to nearly 20% of the company's outstanding shares.

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GM's Financial Moves and Outlook

In January, GM will increase its dividend by one-third to 12 cents per share, another move designed to bolster the stock price.

At least on Wednesday, the idea worked. At lunchtime, GM stock was up nearly 13% to $31.71. However, the stock is still down more than 20% in the last year.

GM also reaffirmed its full-year earnings prediction, which had been dropped when the UAW began striking at Detroit manufacturers' facilities on September 15. These strikes at GM lasted until October 30.

The business now expects full-year net income of $9.1 billion to $9.7 billion, down from $9.3 billion to $10.7 billion before. However, GM plans to produce more cash for the entire year. It anticipates free cash flow of $10.5 billion to $11.5 billion, up from a previous estimate of $7 billion to $9 billion.

To get there, GM intends to reduce capital investment, including spending on electric vehicles and at Cruise, its struggling autonomous vehicle arm.

Last month, California officials canceled the subsidiary's robotaxi license after one of its cars pulled a pedestrian to the side of a roadway after the individual was injured by another car.

Barra attributed some of the stock price decline on issues at Cruise. She anticipates that when driverless taxi operations start, the speed of Cruise's expansion will drop, with investment falling by hundreds of millions of dollars next year compared to this year.

GM had lofty goals for Cruise, which it purchased eight years ago. The business expected $1 billion in yearly sales by 2025, a significant increase from $106 million last year. Cruise lost $1.9 billion before taxes in the first nine months of this year.

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