GM sees US$ 9.3 billion hit from labor deals, outlines US$ 10 billion stock buyback: Report

General Motors said on Wednesday its new labor deals following a lengthy U.S. strike will cost it US$ 9.3 billion even as it outlined US$ 10 billion in share buybacks, a 33% dividend increase and reduced spending at its robotaxi unit Cruise, Reuters reported.

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 7.7% in premarket trading on Wednesday. The Detroit automaker also lowered 2023 profit expectations after the U.S. strike by the United Auto Workers (UAW), Reuters said.

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

The US$ 9.3 billion in additional costs through 2028 is for deals with the UAW as well as Canadian union Unifor, and translates to about US$ 575 per vehicle over the life of the deals, as stated by Reuters.

GM's new guidance reduced expected net income attributable to stockholders for 2023 to a range of US$ 9.1 billion to US$ 9.7 billion, compared to the previous outlook of US$ 9.3 billion to US$ 10.7 billion. That includes an estimated US$ 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 US$ 1.3 billion including the higher wages and benefits in the deal, as Reported by Reuters.

"We will return significant capital to shareholders," GM CEO Mary Barra said in a statement setting out the largest US. automaker's updated targets.

GM said earlier this year it would cut fixed costs by US$ 2 billion by the end of 2024 and then followed up in July with plans for another US$ 1 billion in cost reductions. In April, GM said about 5,000 salaried workers had taken buyouts and agreed to leave the company, said Reuters

GM said it would cut costs at Cruise, which has suspended all U.S. testing after a crash in California last month prompted that state's regulators to bar the company from testing driverless vehicles. "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," Barra said in a shareholder letter on Wednesday, the newswire reported.

She added that GM needed to "rebuild trust" with state and federal regulators, and others Cruise works with.

Cruise has lost more than US$ 8 billion since 2017, including US$ 728 million in the third quarter of this year. Cruise is facing federal safety investigations and has not won approval from U.S. regulators to use its next-generation self-driving car, which does not have human controls, on public roads, Reuters reported.

Barra also said she was "disappointed" with the company's EV production this year due to difficulties with battery module assembly, but GM expects "significantly higher" production and "significantly improved" profit margins in that business in 2024.

GM now faces higher costs under a new contract with the UAW. The company said it was finalising its budget for next year "that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing."

GM's accelerated share repurchase program will advance US$ 10 billion to executing banks, and the company will immediately receive and retire US$ 6.8 billion worth of GM common stock, Reuters reported.

"Our cash balance, which is well above our target, is a function of our recent record profits and our prudent management of resources through the pandemic, supply chain disruptions and labor negotiations," Barra said.

GM had approximately 1.37 billion shares of common stock outstanding prior to the buyback program, the company said. The program is expected to end in late 2024 and will be executed by Bank of America, Goldman Sachs, Barclays and Citibank. GM will still have another US$ 1.4 billion of capacity remaining under its share repurchase authorization for additional stock buybacks. It also expects to increase its common stock dividend by 3 cents per quarter to 12 cents a share beginning in 2024, as reported by Reuters.