General Motors (GM) takes $9.3B hit from labor deals, plans $10B buyback

General Motors (NYSE: GM) announced on Wednesday that its recent labor agreements following an extended U.S. strike will result in a $9.3 billion expense. Despite this, the company has detailed plans for $10 billion in share repurchases, a 33% hike in dividends, and a significant reduction in expenditure for its self-driving taxi venture, Cruise.

At Tuesday's closing price, the buyback amounts to approximately a quarter of GM's common stock. Prior to this announcement, GM's shares had experienced a 14% decline this year, but showed a subsequent 9% increase in premarket trading on Wednesday.

Following the U.S. strike led by the United Auto Workers (UAW), the Detroit-based automaker revised its profit forecasts down for 2023.

Throughout this year, General Motors has encountered challenges enhancing its stock value, grappling with the impact of the UAW strike, issues within its Cruise self-driving vehicle division, and complications in launching its new electric vehicles.

The $9.3 billion in extra expenses projected until 2028 covers the agreements reached with both the UAW and the Canadian union Unifor, and roughly translates to about $575 per vehicle over the duration of these agreements.

"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," Said GM CEO Mary Barra.

GM's accelerated share repurchase plan will provide $10 billion to executing banks, resulting in an immediate receipt and retirement of $6.8 billion worth of GM common stock, leaving the automaker with a $1.4 billion capacity remaining under its share repurchase authorization, allowing for further stock buybacks.

Additionally, the company anticipates raising its common stock dividend by 3 cents per quarter, reaching 12 cents per share starting in 2024.

Shares of GM are up 10.42% in mid-day trading on Wednesday.

By Michael Elkins | [email protected]

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