General Motors is sending a positive signal to the outside world to adjust for the adverse effects of previous strikes and autonomous taxi business.
On November 29th, General Motors announced the resumption of its 2023 full year profit guidance. In addition, the company has announced a $10 billion accelerated stock repurchase plan and plans to increase common stock dividends by 33% starting from 2024.
General Motors expects a net profit attributable to shareholders of $9.1 billion to $9.7 billion for the full year of 2023, with diluted earnings per share ranging from $6.52 to $7.02.
General Motors will prepay $10 billion to the executing bank and subsequently recover $6.8 billion worth of General Motors common stock. This plan is expected to end in the fourth quarter of 2024. In addition, General Motors has $1.4 billion of remaining funds under its stock repurchase authorization for additional, opportunistic stock repurchases.
In developed capital markets, companies use stock repurchases as a common means to optimize capital structure and enhance company value, which can send positive signals when the company's stock price is undervalued due to adverse effects.
Since this year, General Motors has experienced problems such as the strike of the United Auto Workers, the suspension of the business of its subsidiary Cruise autonomous vehicle, and the unsmooth launch of new electric vehicles. It has been difficult to boost its share price. This buyback is conducive to releasing positive signals to the outside world and helping its share price recover.
After the previous third quarter financial report was released, General Motors withdrew its annual profit guidance due to uncertainty about whether it could achieve expected profits. At that time, the strike by American car workers lasted until the sixth week, making it difficult to predict General Motors' financial prospects. In the end, General Motors lost nearly $800 million in the strike.
This month, Detroit's three major automakers finally voted to pass a new labor agreement, and General Motors stated that the new contract now faces higher cost issues. By 2028, the new labor agreement will result in a loss of $9.3 billion, equivalent to approximately $575 per vehicle during the transaction period. Next year, General Motors' budget will completely offset the costs brought about by the new agreement and the incremental costs of future development.
In addition, General Motors has stated that it will cut Cruise's budget by hundreds of millions of yuan next year and cautiously expand after resuming operations. This will lead to large-scale layoffs for the self driving taxi company under General Motors, which currently has approximately 3800 employees.
Since the beginning of this year, Cruise has frequently encountered problems. Since the car accident in California last month, Cruise has been forced to suspend all autonomous vehicle operations in the United States. The California automotive regulatory agency believes that it poses an unreasonable risk to public safety and has revoked Cruise's license to operate unmanned vehicles. Cruise co-founder and CEO Kyle Vogt has also announced his resignation.
In fact, General Motors has been in a loss making state since 2017, with a current loss of over 8 billion US dollars, including a loss of 728 million US dollars in the third quarter of this year.
In addition, General Motors also faces difficulties in its electrification transformation. Previously, General Motors had been actively facing the transformation towards electrification, not only increasing investment, but also announcing the joint development of low-cost electric vehicles with Honda. Not long ago, due to the slowdown in the growth of electric vehicles in the United States, this plan was also announced to be discontinued.
General Motors CEO Mary Barra stated that she is "disappointed" with the company's electric vehicle production this year due to difficulties in assembling battery modules. However, the company expects a significant increase in electric vehicle production in 2024 and a significant increase in profit margins.
In addition, General Motors has cancelled the $6 billion revolving credit arrangement it received in October last year and plans to sign a new 364 day $3 billion committed credit arrangement with banks executing stock repurchases.