General Motors is trying to assure investors about the health of its business after recent setbacks in fledgling pursuits such as driverless and electric vehicles. In today’s BNN breaking news, the automaker wants to increase cash returns to shareholders and announced a $10 billion share buyback in 2024.
It will be the largest share buyback for the automaker. The funds earmarked earlier for the development of autonomous vehicles and EVs will be used to partially fund share buybacks. Mary Barra, the Chief Executive Officer of General Motors, set aside these funds earlier as part of the growth strategy.
General Motors also decided to reduce spending across its businesses in 2024. It is against the backdrop of higher labor costs after the company signed a new labor contract with UAW (United Auto Workers). The CEO is trying to reassure its investors about the strength of its main business, which includes diesel-powered and gas-powered SUVs and trucks. Barra is also trying to lift the falling shares.
General Motors expects to report strong profits
According to the latest available information, the automaker will strive to log better-than-expected profits in 2023, even though it lost $1.1 billion in its bottom line in Q3 and Q4 as a result of a six-week strike by the workers. Its full-year operating profit is expected to reach $12.7 billion as it decides to withdraw the guidance issued last month during the strike.
In a communication to investors on Wednesday, Barra said the cash generation and profitability of its internal combustion engine business will be stronger this year. However, the growth plans of General Motors are lagging and testing the patience of investors.
Shares hit a 3-year low
In today’s USA news, the shares of General Motors have dropped by 14% through Tuesday. Its shares also hit a three-year low in November 2023. Its shares recovered 5% in the premarket hours on Wednesday.
General Motors slows down investment in EVs
General Motors has slowed down investment in EVs, just like other automakers, owing to easing consumers’ appetite for battery-powered vehicles. It has also slashed the targets for EV production, citing weak demand.
General Motors said it has decided to postpone the inauguration of its electric truck factory by a year in suburban Detroit. It has also shelved the plan for 400,000 EVs over 2 years, through mid-2024.
The driverless car business based in San Francisco, Cruise, is trying to establish a ride-hailing service. The CEO is also facing questions about the future of Cruise, which faced rough weather after regulators in California pulled its permits after a driverless car dragged a woman in an accident. As a result, Cruise halted its operations and issued a statement saying it would focus only on one city, compared to the 12 cities announced earlier. It has also not given a timeline to resume its service.
In a communication on Wednesday, Barra said the demand for EVs is moving up slowly, and the demand for EVs may pick up in the future when the network for charging improves and after the rollout of new models. The company decided to cut spending on Cruise.