GM initiates buyback, increases dividend, restores 2023 guidance

General Motors is working to restore Wall Street’s confidence through 2024 with several companies Investor-focused initiatives Wednesday after a turbulent year of labor strikes and setbacks in its plans for electric and self-driving cars.

The Detroit automaker plans to raise its quarterly dividend next year by 33% to 12 cents per share; Initiating a $10 billion accelerated stock buyback program; It will revise its 2023 guidance to include an estimated $1.1 billion in EBIT, or adjusted EBIT, from the impact of nearly six weeks of U.S. labor strikes by the United Auto Workers union.

General Motors CEO Mary Barra In the current situation He said the company is finalizing next year’s budget that will “fully offset the additional costs of our new labor agreements.”

“The long-term plan we are implementing includes reducing the company’s capital intensity, developing products more efficiently, and continuing to reduce our fixed and variable costs,” she said.

GM shares jumped nearly 8% during premarket trading on Wednesday. Heading into the announcement, the stock is down 14.1% so far this year.

GM’s revised guidance for 2023 also includes:

• Net income attributable to shareholders ranged from $9.1 billion to $9.7 billion, compared to previous expectations of $9.3 billion to $10.7 billion.
• EBITDA was $11.7 billion to $12.7 billion, compared to previous expectations of $12 billion to $14 billion.
• Adjusted earnings per share are about $7.20 to $7.70 including share repurchases, compared to the previous forecast of $7.15 to $8.15.
• Earnings per share range from $6.52 to $7.02, including share repurchases, compared to previous expectations of $6.54 to $7.54.
• Automotive free cash flow increased from $10.5 billion to $11.5 billion, compared to previous expectations of $7 billion to $9 billion.
• Automotive net cash generated from operating activities ranges from $19.5 billion to $21 billion, compared to previous expectations of $17.4 billion to $20.4 billion.

GM withdrew its guidance when it reported third-quarter earnings on October 24, citing volatility caused by UAW negotiations and labor strikes. The work stoppages ended on October 30 when the two sides reached a preliminary agreement.

Before the UAW strikes, CFO Paul Jacobson said the company was on track to meet “about the upper half” of its earnings expectations.

The automaker said Wednesday that new business deals in the United States and Canada are expected to increase costs by $9.3 billion and add approximately $575 in vehicle costs. The majority of that impact comes from the UAW deal, which expires in April 2028.

The UAW deal includes at least a 25% hourly wage increase, cost-of-living adjustments and enhanced profit-sharing payments, among other benefits.

To offset some of those increased costs, GM said Wednesday that it now expects 2023 capital spending to be between $11.0 billion and $11.5 billion, down from previous guidance of $11 billion to $12 billion. This is due to previously announced plans to delay some new products and investments, especially regarding electric vehicles.

Barra said in a letter to shareholders on Wednesday that she was “disappointed” in the company’s production this year of the next generation of electric vehicles, known as Ultium vehicles. The company expects “significantly higher Ultium EV production and significant improvement in EV profit margins,” it said.

“We have spent years preparing the company for an all-electric future, and our long-term profitability and margin goals remain sound, despite recent headwinds,” Barra said.

GM said it plans to earn low-to-moderate adjusted earnings before interest and tax (EBIT) margins on its electric vehicle portfolio in 2025, before the positive impact of clean energy tax credits. It also said it plans to offer electric cars exclusively by 2035.

Barra also said the automaker is “addressing challenges” at its Cruise subsidiary, which has the majority of its self-driving cars.

Cruise recently issued a voluntary recall of 950 robo-taxis and suspended all operations of the vehicles on public roads following a series of incidents that drew criticism from first responders, labor activists and local elected officials, especially in San Francisco.

The events, specifically an October accident involving a pedestrian, led CEO and co-founder Kyle Vogt to resign from the company.

“Our priority now is to focus the team on safety, transparency and accountability,” Parra said. “We must rebuild trust with regulators at the local, state and federal levels, as well as with first responders and the communities in which Cruz will be working.”

The accelerated stock buyback includes a total of $10 billion for banks implementing 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 that will ultimately be 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 weighted average daily prices of GM shares.

Outside of the announced program, GM said it will have $1.4 billion of capacity remaining under its stock repurchase authorization for “additional and opportunistic stock repurchases.”

The company said it returned $4.2 billion in common stock dividends and repurchases from the beginning of 2022 through the third quarter of 2023, while generating more than $20.5 billion in auto-adjusted free cash flow after business investments.

“These strategies are designed to keep our margins and free cash flow strong, and we are well positioned as we head into 2024,” Barra said at the end of her letter to shareholders. “I am confident that we will be able to execute on our plan and excited about what the future holds. We look forward to sharing our progress with you.”

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