GM sees $9.3bn hit from new labour deals, outlines $10bn buyback

WASHINGTON: General Motors said on Wednesday its new labor deals after a lengthy US strike will cost it $9.3 billion even as it outlined $10 billion in share buybacks, a 33% dividend increase and “substantially lower” 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 10% to $31.92 in on Wednesday.

The Detroit automaker also lowered 2023 profit expectations after the US strike by the United Auto Workers (UAW).

GM has struggled to boost its stock price as it dealt this year with the UAW strike, and with problems at its Cruise self-driving vehicle unit and rollout of its new electric vehicles.

“Finally some good news for GM and this was strong outlook and comments from Barra & Co post the UAW debacle,” Wedbush Securities analyst Daniel Ives said in an email. “Now it’s about getting the train back on the tracks and this a great start.” The $9.3 billion in additional costs through 2028 is for agreements 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.

“Now that we have a ratified contract and a clear path forward that includes greater operating investment efficiencies, we can resume returning capital to shareholders per our plan,” GM CEO Mary Barra said on an investor conference call, during which officials set out the largest US automaker’s updated targets.

However, she also acknowledged how GM’s stock price was “disappointing to everyone,” pointing to how shares at about $28 were 15% below GM’s 2010 initial public offering price.

GM shares currently trade 4.4 times forward profit estimates, compared with 6.3 for Ford, 8.8 for Toyota and 66.1 for EV market leader Tesla. However, Volkswagen and Stellantis’ share price multiples are an even lower at 3.5 each.