General Motors to Regain Wall Street’s Confidence in 2024
General Motors (GM) is trying to win back investors’ trust after a difficult year due to labor strikes and setbacks in its electric and autonomous vehicle plans.
CEO’s Statement and Initiatives
According to GM, it plans to improve investor confidence by increasing its quarterly dividend next year by 33% to 12 cents per share. Additionally, it plans to start an accelerated $10 billion share repurchase. GM also announced that it is reinstating its 2023 guidance to include an estimated $1.1 billion earnings before interest and tax, or EBIT-adjusted, impact from roughly six weeks of U.S. labor strikes by the United Auto Workers union. In a statement, GM CEO Mary Barra mentioned that the company is working on a budget for next year to offset the incremental costs of new labor agreements. The long-term plan includes reducing the capital intensity of the business, developing products more efficiently, and reducing fixed and variable costs.
Reinstated 2023 Guidance
The reinstated 2023 guidance also includes the following: Net income attributable to stockholders of $9.1 billion to $9.7 billion, compared to a previous outlook of $9.3 billion to $10.7 billion. Furthermore, GM expect adjusted EBIT of $11.7 billion to $12.7 billion, compared to the previous outlook of $12.0 billion to $14.0 billion. It anticipates adjusted earnings per share of roughly $7.20 to $7.70 including the stock buyback, compared to the previous outlook of $7.15 to $8.15.
Evidence of Recovery
GM had to pull its guidance when it reported its third-quarter earnings on October 24 due to the volatility caused by the UAW negotiations and labor strikes. However, the work stoppages ended October 30 when the sides reached a tentative deal. Before the UAW strikes began, CFO Paul Jacobson said the company was on track to achieve “toward the upper half” of its earnings forecast. GM had lost approximately $800 million in pretax earnings due to lost vehicle production, including $200 million during the third quarter. Now, the company anticipates 2023 capital spending to be between $11.0 billion and $11.5 billion.
Mary Barra’s Disappointment
GM CEO Mary Barra expressed her disappointment in the company’s production this year of its next-generation electric vehicles, known as Ultium vehicles. She also mentioned that the automaker is “addressing challenges” at its majority-owned autonomous vehicle subsidiary, Cruise.
Barra asserted that the company’s long-term plans are focused on sustainable growth and expansion.
In light of these announcements, GM has stated that it will continue to work toward restoring investor confidence and improving its financial performance. This is a developing story and further announcements are expected in the coming months.
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