GM initiates buyback, increases dividend, restores 2023 guidance

General Motors Co. is seeking to restore Wall Street’s confidence through 2024 with several investor-focused initiatives on Wednesday after a tumultuous year of labor strikes and setbacks in its plans for electric and self-driving vehicles.

The Detroit automaker plans to raise its quarterly dividend next year by 33% to 12 cents per share; initiating an accelerated stock buyback worth $10 billion; 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.

GM CEO Mary Barra said in a statement that the company is finalizing next year’s budget that “will fully offset the additional costs of new labor agreements and our long-term plan includes reducing the company’s capital intensity and developing products.” more efficiently, and continue to reduce our fixed and variable costs.”

GM shares jumped nearly 6% 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.
• EBIT was revised from $11.7 billion to $12.7 billion, compared to previous expectations of $12.0 billion to $14.0 billion.
• Adjusted EPS of about $7.20 to $7.70 including share repurchases, compared to previous expectations 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 adjusted free cash flow of $10.5 billion to $11.5 billion, compared to previous expectations of $7.0 billion to $9.0 billion.
• Automotive segment net cash provided by operating activities ranges from $19.5 billion to $21.0 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.

At the time, GM said the UAW strikes had cost the automaker nearly $800 million in pre-tax profits due to lost vehicle production, including $200 million during the third quarter.

GM said on 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, driven by previously announced plans to delay some new products and investments, especially in… Related to 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.

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.

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.”

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