General Motors (GM) has announced a series of initiatives aimed at regaining the trust of Wall Street investors after a challenging year that included labor strikes and setbacks in its plans for electric and autonomous vehicles. The company's CEO, Mary Barra, has outlined a range of measures designed to boost shareholder confidence, including an increase in quarterly dividends, a $10 billion share repurchase program, and the reinstatement of its 2023 guidance.
Measures to Boost Shareholder Confidence
As part of its efforts to restore investor faith, GM plans to increase its quarterly dividend by 33% to 12 cents per share. The company will also initiate an accelerated $10 billion share repurchase program, which it hopes will help to drive up the value of its stock. Additionally, GM is reinstating its 2023 guidance, which includes an estimated $1.1 billion in earnings before interest and tax impact from roughly six weeks of U.S. labor strikes by the United Auto Workers union.
Long-term Plan
Barra has said that the company is finalizing a budget for next year that will "fully offset the incremental costs of our new labor agreements." She added that the long-term plan includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing fixed and variable costs.
Positive Impact on Wall Street
The announcement has already had a positive impact on Wall Street, with shares of GM jumping roughly 10% in early trading on Wednesday. Barra acknowledged that the stock price "is disappointing to everyone," but expressed confidence that the company's new initiatives will help to turn things around.
Reinstated 2023 Guidance
GM's reinstated 2023 guidance includes net income attributable to stockholders of $9.1 billion to $9.7 billion, adjusted EBIT of $11.7 billion to $12.7 billion, adjusted earnings per share of roughly $7.20 to $7.70 including the stock buyback, EPS in the range of $6.52 to $7.02 including the stock buyback, adjusted automotive free cash flow of $10.5 billion to $11.5 billion, and net automotive cash provided by operating activities of $19.5 billion to $21 billion.
UAW Strikes and Labor Deals
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.
Before the UAW strikes, CFO Paul Jacobson said the company was on track to achieve "toward the upper half" of its earnings forecast. 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 of that impact is from the UAW deal, which expires in April 2028.
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.
Ultium Vehicles and EV Portfolio
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 "disappointed" in the company's production this year of its next-generation EVs, known as Ultium vehicles. She said the company expects "significantly higher Ultium EV production and significantly improved EV margins."
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.
Challenges at Cruise
Barra also said the automaker is "addressing challenges" at Cruise, its majority-owned autonomous vehicle subsidiary. GM is planning to spend "hundreds of millions of dollars" less on Cruise next year compared to 2023, CFO Jacobson said. The automaker has reported $1.9 billion in 2023 Cruise losses through the third quarter of the year.
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.
"Our priority now is to focus the team on safety, transparency, and accountability," Barra said in the letter. "We must rebuild trust with regulators at the local, state, and federal levels, as well as with the first responders and the communities in which Cruise will operate."
Barra declined to further elaborate on GM's plans for Cruise, pending ongoing independent investigations into the company. She reiterated that when Cruise does eventually relaunch, it will be in a more focused, disciplined way.
The accelerated stock buyback includes an aggregate of $10 billion to the banks executing the program: Bank of America, Goldman Sachs, Barclays, and Citibank. GM will immediately receive and retire $6.8 billion worth of its common stock.
These strategies are designed to keep GM's margins and free cash flow strong as it heads into 2024. Barra expressed confidence that the company will be able to execute its plan and is excited about what the future holds. She looks forward to sharing progress with shareholders.
Summary
GM's recent initiatives are aimed at restoring investor confidence after a challenging year that included labor strikes and setbacks in its plans for electric and autonomous vehicles. The company's CEO has outlined a range of measures designed to boost shareholder confidence, including an increase in quarterly dividends, a $10 billion share repurchase program, and the reinstatement of its 2023 guidance. While there are still challenges ahead, GM is confident that it can execute its plan and deliver strong results for shareholders in the years ahead.
(This article is sourced from cnbc.com and curated by Thetransporteronline24)
