GM to take $9.3bn hit as labor deals strain finances
What's the story
General Motors on Wednesday disclosed that its new labor agreements, following an extended UAW (United Auto Workers) strike, will cost it $9.3 billion.
Despite this expense, the company detailed plans for $10 billion in share buybacks, a 33% hike in dividends, and significant reductions in spending for its self-driving taxi division, Cruise.
GM CEO Mary Barra said, "We will return significant capital to shareholders," while discussing the updated targets.
Details
Revised profit outlook and strike impact
The UAW strike has led GM to lower its 2023 profit expectations.
The revised guidance now predicts net income for stockholders in 2023 to be between $9.1 billion and $9.7 billion, down from the previous range of $9.3 billion to $10.7 billion.
The estimated $1.1 billion EBIT-adjusted impact from the six-week-long UAW strike mainly stems from lost production, with a total impact of $1.3 billion in 2023, including higher wages and benefits.
What Next?
Cruise unit cost-cutting and trust rebuilding
GM is looking to cut costs at Cruise after a crash in California last month led state regulators to ban the company from testing driverless vehicles.
In a shareholder letter, Barra stated, "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."
She added that GM needs to "rebuild trust" with regulators and other stakeholders.
Insights
EV production disappointment and future plans
Despite challenges with battery module assembly, GM anticipates "significantly higher" production and improved profit margins in the electric vehicle (EV) sector in 2024.
Barra expressed disappointment with this year's EV production but remains optimistic as GM finalizes its budget for 2024.
The company said its budget for next year "will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing."