General Motors announced on Wednesday that it will be implementing a stock buyback plan and raising dividends for investors, offering assurance that the company can absorb increased labor costs related to the weekslong strike by United Auto Workers.
A news release from GM stated that the company lost an estimated $1.1 billion worth of production due to the six-week strike by the UAW.
However, increases in efficiency and expected reductions in cost will allow the company to manage the expected $9.3 billion increase in labor costs that GM is facing after striking a deal with the UAW, per the Associated Press.
The UAW and GM reached a deal at the end of October that included higher pay, better benefits, and other “quality-of-life” improvements, as previously reported by The Dallas Express.
GM Chair and CEO Mary Barra said in the release, “GM will deliver very strong profits in 2023 thanks to an exceptional portfolio of vehicles that customers love and our operating discipline.”
“We are finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements, and the long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs,” she added.
“With this clear path forward, and our strong balance sheet, we will return significant capital to shareholders.”
GM plans to buy back $10 billion of its shares and “will immediately receive and retire $6.8 billion worth of GM’s common stock.”
Additionally, the company will increase its quarterly dividend by 33% to 12 cents per share.
Barra said on a conference call on Wednesday that the company’s stock price was “disappointing to everyone,” as it was roughly 15% lower than the initial 2010 public offering price after returning from bankruptcy, per the AP.
After announcing the new plans, the price for GM stock increased by roughly 13%.
These changes follow claims by GM from earlier this year that the company will cut costs by $2 billion by the end of 2024, as reported by Reuters.
A major step in this process includes cutting costs for its currently inoperative subsidiary Cruise, the automaker’s fleet of self-driving cars that work as a taxi service.
“We expect the pace of Cruise’s expansion to be more deliberate when operations resume, resulting in substantially lower spending in 2024 than in 2023,” said Barra in a shareholder letter, per Reuters.
Cruise is currently idle, as the California Department of Motor Vehicles revoked the permit allowing it to give rides in the state, citing concerns about how the company handled an accident involving one of its robotaxis, as reported by The Dallas Express.
Since 2016, Cruise has lost its CEO and, per Reuters, more than $8 billion, including $728 million in the third quarter of 2023.
Cutting costs at Cruise may be necessary for GM to reach the yearly predictions outlined in its release, as the company is anticipating a full-year net income of $9.1 billion to $9.7 billion.
Although this prediction is reduced from the initial projections of 9.3 billion to $10.7 billion, GM expects to have an increased amount of free cash flow.
New projections from the company put free cash flow at $10.5 billion to $11.5 billion, an increase from the initial projections of $7 billion to $9 billion.
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