General Motors Embarks on Investor-Focused Initiatives
General Motors is working to recover from a turbulent year as it aims to restore Wall Street’s trust leading into 2024. After a year marked by labor strikes and setbacks in its plans for electric and autonomous vehicles, the Detroit automaker is implementing several initiatives geared towards investors to regain confidence.
Increasing Dividends and Share Repurchase
To signal its commitment to shareholders, GM plans to ramp up its quarterly dividend by 33% to 12 cents per share beginning next year. Additionally, the company will initiate an accelerated $10 billion share repurchase program. These moves are part of a larger plan to counteract the incremental costs of new labor agreements in its budget for the upcoming year, according to GM CEO Mary Barra.
Reinstated 2023 Guidance
Shares of GM soared approximately 8% during premarket trading on Wednesday as the company announced its reinstated 2023 guidance. Barra indicated that the long-term strategy includes reducing business capital intensity, developing products more efficiently, and reducing fixed and variable costs. With regard to the reinstated 2023 guidance, GM looks forward to a net income attributable to stockholders of $9.1 billion to $9.7 billion and adjusted earnings per share of roughly $7.20 to $7.70, including the stock buyback.
Impact of Labor Strikes
GM had to pull its guidance when it reported its third-quarter earnings due to volatility caused by negotiations with the United Auto Workers (UAW) and subsequent labor strikes. The UAW deal is expected to increase costs for the company, with new labor agreements in the U.S. and Canada projected to raise overall costs by $9.3 billion, and add approximately $575 in costs per vehicle.
Looking to the Future
GM is focusing on electric vehicle (EV) production, expecting “significantly higher Ultium EV production and significantly improved EV margins.” The company plans to earn low- to mid-single-digit EBIT-adjusted margins on its EV portfolio in 2025 and intends to offer electric vehicles exclusively by 2035. Barra also addressed challenges at its majority-owned autonomous vehicle subsidiary Cruise, emphasizing the need to “rebuild trust with regulators at the local, state, and federal levels.”
Accelerated Stock Buyback
The announcement also revealed an accelerated stock buyback, which includes $10 billion to the banks executing the program, including Bank of America, Goldman Sachs, Barclays, and Citibank. Outside of the initiated program, GM has $1.4 billion of capacity remaining under its share repurchase authorization “for additional, opportunistic share repurchases.”
In conclusion, GM seeks to maintain strong margins and free cash flow as the company heads into 2024. Barra expressed confidence in the company’s plan and is eager to share its progress as they move forward.
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