GM sees $9.3 billion hit from labor deals, outlines $10 billion stock
buyback
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[November 29, 2023] By
David Shepardson
(Reuters) -General Motors said on Wednesday its new labor deals
following a lengthy U.S. strike will cost it $9.3 billion even as it
outlined $10 billion in share buybacks, a 33% dividend increase and
reduced spending at its robotaxi unit Cruise.
The buyback is the equivalent at Tuesday's closing price to nearly a
quarter of GM's common stock. Its shares were down about 14% this year
before rising 7.7% in premarket trading on Wednesday.
The Detroit automaker also lowered 2023 profit expectations after the
U.S. strike by the United Auto Workers (UAW).
GM has struggled to boost its stock price as it dealt this year with the
UAW strike, problems at its Cruise self-driving vehicle unit and with
the rollout of its new electric vehicles.
The $9.3 billion in additional costs through 2028 is for deals with the
UAW as well as Canadian union Unifor, and translates to about $575 per
vehicle over the life of the deals.
GM's new guidance reduced expected net income attributable to
stockholders for 2023 to a range of $9.1 billion to $9.7 billion,
compared to the previous outlook of $9.3 billion to $10.7 billion.
That includes an estimated $1.1 billion EBIT-adjusted impact from the
UAW strike, which lasted just over six weeks, primarily from lost
production. The total impact in 2023 is $1.3 billion including the
higher wages and benefits in the deal.
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"We will return significant capital to shareholders," GM CEO Mary Barra
said in a statement setting out the largest U.S. automaker's updated
targets.
GM said earlier this year it would cut fixed costs by $2 billion by the
end of 2024 and then followed up in July with plans for another $1
billion in cost reductions. In April, GM said about 5,000 salaried
workers had taken buyouts and agreed to leave the company.
GM said it would cut costs at Cruise, which has suspended all U.S.
testing after a crash in California last month prompted that state's
regulators to bar the company from testing driverless vehicles.
"We expect the pace of Cruise’s expansion to be more deliberate when
operations resume, resulting in substantially lower spending in 2024
than in 2023," Barra said in a shareholder letter on Wednesday.
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![](../images/112923PIX/busine70.jpg)
Mary Barra, Chair and CEO of General Motors Company speaks at the
2022 Milken Institute Global Conference in Beverly Hills,
California, U.S., May 2, 2022. REUTERS/Mike Blake/File Photo
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She added that GM needed to "rebuild trust" with state and federal
regulators, and others Cruise works with.
Cruise has lost more than $8 billion since 2017, including $728
million in the third quarter of this year.
Cruise is facing federal safety investigations and has not won
approval from U.S. regulators to use its next-generation self
driving car, which does not have human controls, on public roads.
Barra also said she was "disappointed" with the company's EV
production this year due to difficulties with battery module
assembly, but GM expects "significantly higher" production and
"significantly improved" profit margins in that business in 2024.
GM now faces higher costs under a new contract with the UAW. The
company said it was finalizing its budget for next year "that will
fully offset the incremental costs of our new labor agreements and
the long-term plan we are executing."
GM's accelerated share repurchase program will advance $10 billion
to executing banks, and the company will immediately receive and
retire $6.8 billion worth of GM common stock.
"Our cash balance, which is well above our target, is a function of
our recent record profits and our prudent management of resources
through the pandemic, supply chain disruptions and labor
negotiations," Barra said.
GM had approximately 1.37 billion shares of common stock outstanding
prior to the buyback program, the company said. The program is
expected to end in late 2024 and will be executed by Bank of
America, Goldman Sachs, Barclays and Citibank.
GM will still have another $1.4 billion of capacity remaining under
its share repurchase authorization for additional stock buybacks.
It also expects to increase its common stock dividend by 3 cents per
quarter to 12 cents a share beginning in 2024.
(Reporting by David Shepardson in Washington, additional reporting
by Ben Klayman in Detroit; Editing by Sharon Singleton and Mark
Potter)
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