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General Motors has announced plans to return “significant capital” to shareholders as the US automaker seeks to move past difficulties with its ambitions for electric vehicles and driverless cars and from a six-week strike that cost it $1.1bn.
GM on Wednesday announced a $10bn share buyback and said it would increase its quarterly dividend by 3 cents per share — or 33 per cent — to 12 cents. That helped push the company’s shares up by 9.5 per cent in late-morning trading in New York, having gained as much as 11.8 per cent to hit a two-month high earlier in the day.
The “massive buyback was well above expectations”, Deutsche Bank analyst Emmanuel Rosner said.
The announcement came as the company reinstated its earnings guidance for fiscal 2023, having withdrawn it about a month ago after thousands of US autoworkers walked off the job to demand better pay and working conditions.
The strike resulted in approximately 95,000 fewer cars and trucks being built, and a $1.1bn hit to adjusted operating earnings, chief financial officer Paul Jacobson said.
GM reached a tentative deal with the United Auto Workers union in late October, as did competitors Ford and Stellantis. The labour action resulted in the manufacturer agreeing to raise wages for its workforce by 25 per cent, as well as to include its joint-venture battery plants under its main contract with the union.
The new pay deal will cost GM $9.3bn over the life of the four-year contract, with chief executive Mary Barra saying this would add $575 in cost per vehicle over the period. At the battery plants, it will increase costs by $3 per kilowatt-hour.
“The cost of new labour agreements have been a concern for investors and a drag on our stock,” Barra said. “The net result was higher than we anticipated, but not significantly.”
Barra said that foreign carmakers in the US had also raised wages, “so the same relative gap [with competitors] is being restored”.
GM also plans to cut spending on Cruise, its self-driving unit, by “hundreds of millions of dollars”, Jacobson said. Last month one of the vehicles injured a pedestrian in San Francisco. The California Department of Motor Vehicles has accused the GM subsidiary of having “misrepresented” the details of the crash, and the carmaker has hired a law firm to review its response.
The company needed to rebuild trust with regulators, Barra said. But as it examined the technology used in the programme, “we’ve found areas where we’re going to have synergies between the work General Motors is doing and Cruise, that is going to allow us to be more efficient from an overall budget spend”.
The company acknowledged difficulty building battery modules for its electric vehicles this year, with Jacobson noting “there’s been some self-inflicted harm in terms of our execution”.
GM on Wednesday predicted it would achieve adjusted earnings of between $7.20 and $7.70 a share in the 2023 fiscal year. That compares with its previous outlook of $7.15 to $8.15 a share and analysts’ estimates of $7.45.
The company said it now expected adjusted automotive free cash flow of $10.5bn to $11.5bn, compared with the previous forecast of $7bn to $9bn.
Source: Financial Times