General Motors is working to regain Wall Street’s confidence main into 2024 with a number of investor-focused initiatives Wednesday following a tumultuous yr of labor strikes and setbacks in its plans for electrical and autonomous automobiles.
The Detroit automaker plans to extend its quarterly dividend subsequent yr by 33% to 12 cents per share; provoke an accelerated $10 billion share repurchase; and reinstate its 2023 guidance to incorporate an estimated $1.1 billion in incomes earlier than curiosity and tax, or EBIT-adjusted, influence from roughly six weeks of U.S. labor strikes by the United Auto Workers union.
GM CEO Mary Barra in a statement mentioned the corporate is finalizing a price range for subsequent yr that can “fully offset the incremental costs of our new labor agreements.
“The long-term plan we’re executing consists of lowering the capital depth of the enterprise, growing merchandise much more effectively, and additional lowering our fastened and variable prices,” she said.
Shares of GM jumped roughly 8% during premarket trading Wednesday. Heading into the announcement, the stock was down 14.1% so far this year.
GM’s reinstated 2023 guidance also includes:
- Net income attributable to stockholders of $9.1 billion to $9.7 billion, compared to a previous outlook of $9.3 billion to $10.7 billion.
- Adjusted EBIT of $11.7 billion to $12.7 billion, compared to the previous outlook of $12 billion to $14 billion.
- Adjusted earnings per share of roughly $7.20 to $7.70 including the stock buyback, compared to the previous outlook of $7.15 to $8.15.
- EPS in the range of $6.52 to $7.02, including the stock buyback, compared to the previous outlook of $6.54 to $7.54.
- Adjusted automotive free cash flow of $10.5 billion to $11.5 billion, compared to the previous outlook of $7 billion to $9 billion.
- Net automotive cash provided by operating activities of $19.5 billion to $21 billion, compared to 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 caused by the UAW negotiations and labor strikes. The work stoppages ended Oct. 30 when the sides reached a tentative deal.
UAW impact
Before the UAW strikes, CFO Paul Jacobson said the company was on track to achieve “towards the higher half” of its earnings forecast.
On Wednesday the automaker said new labor deals in the U.S. and Canada are expected to increase costs by $9.3 billion and add approximately $575 in costs per vehicle. A majority that impact is from the UAW deal, which expires in April 2028.
The UAW deal includes at least 25% hourly pay raises, the reinstatement of cost-of-living adjustments and enhanced profit-sharing payments, among other benefits.
GM inventory after a slew of enterprise updates on Wednesday.
To offset some 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’s driven by previously announced plans to delay some new products and investments, specifically regarding EVs.
Barra in a letter to shareholders Wednesday said she was “upset” in the company’s production this year of its next-generation EVs, known as Ultium vehicles. She said the company expects “considerably larger Ultium EV manufacturing and considerably improved EV margins.”
“We’ve spent years getting ready the corporate for an all-electric future, and our long-term EV profitability and margin objectives are intact, regardless of latest 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 clean 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 local 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 company.
“Our precedence now’s to focus the workforce on security, transparency and accountability,” Barra said. “We should rebuild belief with regulators on the native, state and federal ranges, in addition to with the primary responders and the communities wherein Cruise will function.”
Stock buyback
The accelerated stock buyback includes an aggregate of $10 billion to the banks executing the program, including Bank of America, Goldman Sachs, Barclays and Citibank.
GM will immediately receive and retire $6.8 billion worth of its common stock. GM had approximately 1.37 billion shares of common stock outstanding prior to the program.
The total number of shares ultimately repurchased under the initiative will be determined at the end of the program, which is expected to occur during the fourth quarter. It will be based on the average of the daily volume-weighted prices of GM stock.
Outside of the announced program, GM said it will have $1.4 billion of capacity remaining under its share repurchase authorization “for extra, opportunistic share repurchases.”
The company said it has returned $4.2 billion in common stock dividends and buybacks from the start of 2022 through the third quarter of 2023, while generating more than $20.5 billion in adjusted automotive free cash flow after business investments.
“These methods are designed to maintain our margins and free money circulate sturdy, and we’re well-positioned as we head into 2024,” Barra said at the end of her letter to shareholders. “I’m assured we’ll have the ability to execute our plan and enthusiastic about what the long run holds. We stay up for sharing our progress with you.”