(CTN News) – General Motors (GM)announced on Wednesday its plans to repurchase $10 billion worth of shares and increase its dividend by 33%.
This decision comes despite the cost-cutting measures being implemented at its struggling robotaxi unit, Cruise, and the downward revision of profit expectations following the recent auto workers’ strike.
As a result of the revised guidance, the projected net income attributable to stockholders for 2023 now falls within the range of $9.1 billion to $9.7 billion, compared to the previous outlook of $9.3 billion to $10.7 billion.
This adjustment takes into account the estimated $1.1 billion EBIT-adjusted impact caused by the United Auto Workers union strike, which lasted for a little over six weeks and primarily resulted in production losses.
In a statement outlining the updated targets for the year, GM CEO Mary Barra stated that significant capital will be returned to shareholders. Earlier this year, GM announced plans to reduce fixed costs by $2 billion by the end of 2024, followed by an additional $1 billion in July.
The company also reported that 5,000 salaried workers had taken buyouts and left the company.
In response to a recent crash in California, GM plans to cut costs at Cruise and expects a more deliberate pace of expansion when operations resume, resulting in substantially lower spending in 2024 than in 2023, according to Barra’s shareholder letter.
Since 2017, Cruise has incurred losses exceeding $8 billion, with $728 million lost in the third quarter of this year alone. GM, on the other hand, is now facing increased expenses due to a new contract with the UAW.
However, the company is finalizing its budget for next year, which will offset the additional costs of the new labor agreements and the long-term plan they are implementing.
GM’s accelerated share repurchase program will provide $10 billion to executing banks, with $6.8 billion worth of GM common stock immediately received and retired.
Barra stated that their cash balance, which is well above their target, is a result of their recent record profits and prudent resource management during the pandemic, supply chain disruptions, and labor negotiations.
Prior to the buyback program, GM had around 1.37 billion shares of common stock outstanding, as stated by the company.
The program is set to conclude in late 2024 and will be carried out by Bank of America, Goldman Sachs, Barclays, and Citibank. GM will have an additional $1.4 billion of capacity left under its share repurchase authorization for further stock buybacks.
Furthermore, the company anticipates raising its common stock dividend to 12 cents per share, a 3-cent increase per quarter, starting in 2024.