General Motors Unveils Record $10 Billion Buyback, Raises Dividends by 33%

General Motors Co. has announced a significant increase in dividends by 33% and a monumental buyback plan amounting to $10 billion in shares, marking the company’s most extensive repurchase initiative to date. This strategic move has reignited investor interest in GM, particularly at a time when the company faced challenges with its technology investments, leading to a decline in its stock value this year.

Despite facing obstacles stemming from its technology investments and the impact of a six-week United Auto Workers strike on profits, GM has decided to reinstate its 2023 earnings guidance. The revised earnings projections now range between $9.1 billion and $9.7 billion, slightly lower than the earlier forecast of $9.3 billion to $10.7 billion. The strike had compelled the company to withdraw its guidance previously.

Amidst concerns regarding high interest rates affecting car sales and the financial strain from its electric vehicle endeavors, which haven’t yet shown significant results, GM is strategically investing in investor incentives. The goal is to demonstrate its ability to generate substantial cash flow while simultaneously investing in technology, a move aimed at bolstering investor confidence and boosting the company’s stock value, which has declined since CEO Mary Barra’s assumption of office in 2014.

Barra emphasized the company’s robust performance, especially in cash generation, expressing confidence in GM’s ability to continue generating significant free cash flow during the transition to electric vehicles. To offset added labor costs and other expenses, GM plans to focus on increasing efficiencies and implementing cost reductions in the upcoming budget.

Following the announcement, GM’s shares witnessed an 8.9% surge in premarket trading, reaching $31.45 in New York. Despite a 14% decline in the stock value this year until Tuesday, this recent move has sparked optimism among investors, especially as the S&P 500 Index recorded a 19% increase over the same period.

The company’s plan involves raising the quarterly dividend by 3 cents per share to 12 cents, effective from 2024. Additionally, the advanced share repurchase plan includes paying $10 billion to a consortium of executing banks, leading to the immediate retirement of $6.8 billion worth of common stock. This buyback program, slated to conclude in the fourth quarter of 2024, will depend on final settlement and the daily volume-weighted average prices of GM common stock.

Bank of America Corp., Goldman Sachs Group Inc., Barclays Bank PLC, and Citigroup Inc. will execute the repurchase program, with GM retaining $1.4 billion in capacity under its share repurchase authorization for potential additional buybacks.