GM’s stock soars 7% after company unveils $10 billion share buyback and plan to hike dividend by 33%

GM’s stock soars 7% after company unveils $10 billion share buyback and plan to hike dividend by 33%

General Motors Co.’s stock soared 7% early Wednesday, after the car maker unveiled plans to reward its shareholders generously now that labor strikes are out of the way.

The company said it’s reinstating 2023 guidance that it pulled in the third quarter amid the uncertainty about the strikes, planning a $10 billion accelerated share buyback program and a 33% increase in its dividend starting with the January declaration.

The move comes as Chief Executive Mary Barra seeks to reassure shareholders who were unsettled by the strikes and by operational struggles including with electric vehicles, which have proved less popular with consumers than car makers were expecting.

The company said last month it would delay the opening of an EV plant in Detroit by a year, while dropping plans to produce 400,000 EVs through mid-2024.

The company also recently suspended its Cruise driverless-car business after California regulators withdrew its permit following an accident in San Francisco.

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“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,” Barra said in a statement.

GM twice raised its guidance for all of 2023 but withdrew it in the third quarter while workers were striking. It expects the labor disruption to shave $1.1 billion off adjusted EBIT, or earnings before interest and taxes, due to lost production.

But the company lowered its guidance for net income to $9.1 billion to $9.8 billion, which compares with a previous range of $9.3 billion to $10.7 billion.

It expects adjusted per-share earnings of $6.52 to $7.02, compared with prior guidance of $7.15 to $8.15. The company expects capex of $11.0 billion to $11.5 billion, the low end of its prior range of $11.0 billion to $12.0 billion.

The company has also canceled a $6.0 billion revolving-credit facility it entered in October and plans to enter a new 364-day $3.0 billion committed-credit facility with the banks executing the accelerated share buyback.

GM is expecting to increase its quarterly dividend by 3 cents to 12 cents a share starting in January.

The stock has fallen 14% in the year to date, while the S&P 500 has gained 18.6%.

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