General Motors is working to regain Wall Street’s confidence leading into 2024 with several investor-focused initiatives Wednesday following a tumultuous yr of labor strikes and setbacks in its plans for electric and autonomous vehicles.
The Detroit automaker plans to extend its quarterly dividend next yr by 33% to 12 cents per share; initiate an accelerated $10 billion share repurchase; and reinstate its 2023 guidance to incorporate an estimated $1.1Â billion in earning before interest and tax, or EBIT-adjusted, impact from roughly six weeks of U.S. labor strikes by the United Auto Staff union.
GM CEO Mary Barra in a press release said the corporate is finalizing a budget for next yr that can “fully offset the incremental costs of our recent labor agreements.
“The long-term plan we’re executing includes reducing the capital intensity of the business, developing products much more efficiently, and further reducing our fixed and variable costs,” she said.
Shares of GM jumped roughly 8% during premarket trading Wednesday. Heading into the announcement, the stock was down 14.1% thus far this yr.
GM’s reinstated 2023 guidance also includes:
- Net income attributable to stockholders of $9.1 billion to $9.7 billion, in comparison with a previous outlook of $9.3 billion to $10.7 billion.
- Adjusted EBIT of $11.7 billion to $12.7 billion, in comparison with the previous outlook of $12 billion to $14 billion.
- Adjusted earnings per share of roughly $7.20 to $7.70 including the stock buyback, in comparison with the previous outlook of $7.15 to $8.15.
- EPS within the range of $6.52 to $7.02, including the stock buyback, in comparison with the previous outlook of $6.54 to $7.54.
- Adjusted automotive free money flow of $10.5 billion to $11.5 billion, in comparison with the previous outlook of $7 billion to $9 billion.
- Net automotive money provided by operating activities of $19.5 billion to $21 billion, in comparison with the previous outlook of $17.4 billion to $20.4 billion.
GM pulled its guidance when it reported its third-quarter earnings on Oct. 24, citing volatility attributable to the UAW negotiations and labor strikes. The work stoppages ended Oct. 30 when the perimeters reached a tentative deal.
UAW impact
Before the UAW strikes, CFO Paul Jacobson said the corporate was heading in the right direction to attain “toward the upper half” of its earnings forecast.
On Wednesday the automaker said recent labor deals within the U.S. and Canada are expected to extend costs by $9.3 billion and add roughly $575 in costs per vehicle. A majority that impact is from the UAW deal, which expires in April 2028.
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GM stock after a slew of business updates on Wednesday.
To offset a few of those increased costs, GM said Wednesday it now anticipates 2023 capital spending to be between $11.0 billion and $11.5 billion, down from prior guidance of between $11 billion and $12 billion. That is driven by previously announced plans to delay some recent products and investments, specifically regarding EVs.
Barra in a letter to shareholders Wednesday said she was “upset” in the corporate’s production this yr of its next-generation EVs, generally known as Ultium vehicles. She said the corporate expects “significantly higher Ultium EV production and significantly improved EV margins.”
“We have spent years preparing the corporate for an all-electric future, and our long-term EV profitability and margin goals are intact, despite recent headwinds,” Barra said.
GM has said it plans to earn low- to mid-single-digit EBIT-adjusted margins on its EV portfolio in 2025, before the positive impact of fresh energy tax credits. It also has said it plans to exclusively offer electric vehicles by 2035.
Cruise
Barra also said the automaker is “addressing challenges” at its majority-owned autonomous vehicle subsidiary Cruise.
Cruise recently issued a voluntary recall affecting 950 of its robotaxis and suspended all vehicle operations on public roads following a series of incidents that sparked criticism from first responders, labor activists and native elected officials, especially in San Francisco.
The events, specifically an October accident involving a pedestrian, led to CEO and cofounder Kyle Vogt resigning from the corporate.
“Our priority now could be to focus the team on safety, transparency and accountability,” Barra said. “We must rebuild trust with regulators on the local, state and federal levels, in addition to with the primary responders and the communities wherein Cruise will operate.”
Stock buyback
The accelerated stock buyback includes an aggregate of $10 billion to the banks executing this system, including Bank of America, Goldman Sachs, Barclays and Citibank.
GM will immediately receive and retire $6.8 billion value of its common stock. GM had roughly 1.37 billion shares of common stock outstanding prior to this system.
The entire variety of shares ultimately repurchased under the initiative shall be determined at the tip of this system, which is anticipated to occur throughout the fourth quarter. It can be based on the typical of the day by day volume-weighted prices of GM stock.
Outside of the announced program, GM said it is going to have $1.4 billion of capability remaining under its share repurchase authorization “for extra, opportunistic share repurchases.”
The corporate said it has returned $4.2 billion in common stock dividends and buybacks from the beginning of 2022 through the third quarter of 2023, while generating greater than $20.5Â billion in adjusted automotive free money flow after business investments.
“These strategies are designed to maintain our margins and free money flow strong, and we’re well-positioned as we head into 2024,” Barra said at the tip of her letter to shareholders. “I’m confident we’ll have the opportunity to execute our plan and enthusiastic about what the long run holds. We stay up for sharing our progress with you.”
