Quiver Quantitative - General Motors (NYSE:GM) is taking bold steps to reassure investors about the vitality of its core automotive business amidst recent setbacks in its electric and autonomous vehicle ventures. The automaker has announced a significant $10 billion stock buyback plan for the upcoming year, the largest in its recent history. This move, funded partly by reallocating capital previously dedicated to developing electric and driverless cars, reflects a strategic pivot by CEO Mary Barra. This shift in focus aims to bolster GM's stock performance, which has fallen 14% this year, and re-emphasize the profitability of its traditional gas- and diesel-powered vehicles.
Amidst growing labor expenses from new contracts with the United Auto Workers, GM's commitment to its conventional vehicle lineup remains strong, with an expected operating profit of $11.7 billion to $12.7 billion this year. However, several key growth strategies, including the expansion of its electric vehicle (EV) production and the development of its Cruise driverless-car division, have encountered challenges. Regulatory issues have recently led to the suspension of Cruise's driverless car operations, and GM has scaled back its near-term EV production targets. Despite these setbacks, Barra remains steadfast in her commitment to EVs and autonomous vehicles as future growth drivers.
The $10 billion buyback plan is a substantial increase from the $4.2 billion returned to shareholders over the past seven quarters. GM intends to purchase $6.8 billion worth of shares immediately, with the remainder to be acquired by the end of the next year. Additionally, GM plans a 33% increase in its common stock dividend starting in January. These financial maneuvers are part of a broader strategy to balance increased labor costs through capital expenditure reductions in EVs, streamlining vehicle lineups, and cutting expenses across various departments.
Barra's approach marks a nuanced recalibration of GM's strategy, balancing immediate financial stability with long-term innovation goals. While the focus shifts to strengthening its current business model, GM's commitment to future mobility solutions remains integral to its vision, albeit with more cautious and calculated investment. This balance aims to assure investors of GM's resilience and adaptability in an evolving automotive landscape.
This article was originally published on Quiver Quantitative