GM Plans Stock Buyback, Reduced AV Investment

General Motors confirms it is significantly cutting spending on autonomous vehicles but is preparing to repurchase more than $10 billion worth of company stock in a bid to boost its disappointing share price in the face of rising labor costs and slow rollout of new GM electric vehicles.

“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,” says GM Chair and CEO Mary Barra.

While execution fell short in 2023, GM remains committed to its EV strategy, according to Barra, who notes the shift toward electric vehicles continues to gain momentum and U.S. consumers will purchase more than 1 million EVs this year for the first time ever.

“With this clear path forward, and our strong balance sheet, we will return significant capital to shareholders,” Barra (pictured, below left) says during a briefing for analysts arranged to discuss problems with the automaker’s Cruise autonomous-vehicle subsidiary and the new labor contracts.

Barra screenshot

The new contract will add about $500 to the cost of a new GM vehicle next year and $575 to the cost of new vehicles over the life of the agreement, which expires in May 2028, according to Barra. GM is working on ways to offset the cost of the agreement by reducing spending on marketing, product development and non-union personnel.

The cuts already saved GM $500 million in the third quarter and are expected to produce another $500 million in savings during the fourth quarter.

Barra adds GM is making significant cuts at Cruise, where capital spending will be sharply curtailed and plans for adding service in multiple markets around the country will be scaled back. Further changes at Cruise will wait on the outcome of two independent investigations into the company’s operations, according to Barra.

In the face of the crisis created by a string of accidents involving the AVs, GM has restructured Cruise top management and appointed two new co-presidents who will be responsible for revamping plans for the development of autonomous vehicles.

Despite the new labor contract and the restructuring at San Francisco-based Cruise, GM will deliver strong profits in 2023 thanks to “an exceptional portfolio of vehicles that customers love and our operating discipline,” Barra emphasizes during the call.

Barra admits GM’s “execution” of plans to increase EV sales have been hobbled by its inability to produce enough battery cells. The problem stemmed from the automation used in assembling the cells at the new Ultium battery plant in Lordstown, OH, she says.

Additionally, GM is revamping its plans for BrightDrop, a new commercial-vehicle service based on battery-powered vans. BrightDrop will be more “tightly” integrated into GM’s other business units rather than operate independently. GM also is delaying the start of EV production at an assembly plant in Orion Township, MI, until 2025 to rethink the plant’s layout to make it more efficient and productive.

GM now anticipates full-year 2023 capital spending (including investments in its battery joint ventures) to range between $11 billion and $11.5 billion, which is at the low end of its prior guidance range of $11 billion to $12 billion, driven by the previously announced retiming of certain product programs and more capital-efficient investment. The company also says it expects to increase its quarterly common stock dividend by $0.03 per share beginning in first quarter 2024.

The company’s guidance for 2023 has been revised as well. Net income attributable to stockholders is now expected to be between $9.1 billion and $9.7 billion compared to the previous outlook of $9.3 billion to $10.7 billion and diluted earnings per share in the $6.52-$7.02 range, compared to the previous outlook of $6.54-$7.54.

Paul Jacobson, GM’s chief financial officer, adds during the call with analysts that GM’s cash-flow and cash reserves are ample enough to return more money directly to shareholders in the form of a $10 billion stock buyback and a hike in the dividend over the next 12 months.

UAW President Shawn Fain criticized GM’s stock buybacks during the strike as an unnecessary diversion of resources at a time when union members had been forced to accept concessions.