General Motors Co. (GM) has responded to shareholder concerns about the company’s future plans by reinstating its full-year 2023 earnings guidance. The move comes after accounting for costs associated with its new labor contract. In addition, GM has announced a $10 billion accelerated share repurchase (ASR) program and plans to increase its common stock dividend by 33% starting in January 2024.
Following these announcements, GM’s shares surged by 12% to $32.29 shortly after the market opened in New York on Wednesday. This countered a year-long trend of a 14% reduction in value, compared to a 19% increase in the S&P 500 Index. Throughout the week, GM’s share price has risen by nearly $4.00.
GM’s CEO, Mary Barra, expressed confidence in achieving the company’s targets and stated that the work towards their goals has already begun. The total number of GM shares repurchased will be determined based on final settlement and the daily volume-weighted average prices of GM common stock during the program, which will conclude in the fourth quarter of 2024. The repurchase program will be executed by Bank of America Corp., Goldman Sachs Group Inc., Barclays Bank PLC, and Citigroup Inc.
While GM and other legacy automakers continue to see short-term profitability in internal combustion engine (ICE) vehicles, the company’s future lies in electric vehicles (EVs) and autonomy. Barra previously announced plans to transition GM’s entire light-duty vehicle portfolio to be all-electric by 2035. However, the company is now moderating the acceleration of EV production in North America to protect pricing, adjust to slower near-term growth in demand, and implement engineering efficiency improvements.
GM faces challenges such as consumer hesitancy due to interest rates, the need to generate net profits during the transition to advanced technology, and the delayed full effect of capital expenditures from its EV expansion. Barra expects these issues to be resolved by mid-2024, with significantly higher Ultium EV production and improved margins.
The recent halt in development of GM’s fully autonomous vehicle, Cruise, after a pedestrian incident has also impacted the company’s long-term growth potential. Cruise is now focusing on prioritizing technology safety in its continued development.
Barra concluded that GM’s clear path forward, strong balance sheet, and confidence in cash generation will enable the company to return significant capital to shareholders. The updated earnings guidance includes revised figures for net income, EBIT-adjusted, EPS-diluted, net automotive cash provided by operating activities, and adjusted automotive free cash flow.
Overall, GM’s actions aim to address shareholder concerns and demonstrate the company’s commitment to its future plans in the EV and autonomy sectors.