General Motors (GM) has unveiled a new $6 billion share buyback program, approved by its board, aimed at continuing to return capital to shareholders. This announcement comes on the heels of the completion of an accelerated $10 billion stock repurchase program, initiated in November 2023, expected to conclude by the end of this month.
"We are very focused on the profitability of our [internal combustion engine] business, we're growing and improving the profitability of our EV business and deploying our capital efficiently. This allows us to continue returning cash to shareholders," GM CFO Paul Jacobson stated in a release. The new buyback authorization allows GM to repurchase shares opportunistically, although a specific timeframe for the program's completion has not been disclosed.
GM shares reacted positively to the news, with a 1% increase in premarket trading, closing Monday at $47.57, marking a 32.4% rise this year. The buyback announcement underscores GM's commitment to its shareholders despite the uncertainties surrounding the adoption of all-electric vehicles (EVs) and a noticeable stall in customer demand for new vehicles.
Jacobson highlighted the company's robust performance, stating, "The investments GM made in its brands and product portfolio over the last several years, and the company's operating discipline, are delivering consistently strong revenue growth, margins and free cash flow."
This new buyback plan comes after GM reported upbeat first-quarter results and raised its annual forecast, buoyed by stable prices and sustained demand for gasoline-engine vehicles. The previous $10 billion buyback was announced shortly after GM secured a new labor agreement with the United Auto Workers (UAW), marking a significant milestone for the company.
"We are very focused on the profitability of our [gas-powered vehicles] business, we're growing and improving the profitability of our EV business," Jacobson reiterated, emphasizing the company's strategic approach to maintaining and growing profitability across both traditional and electric vehicle markets.
Despite the pressures faced throughout 2023, including the UAW strike and challenges at its Cruise self-driving vehicle unit, GM's stock has shown resilience. CEO Mary Barra has previously acknowledged the disappointment in the company's stock performance since its 2010 IPO but remains optimistic about the company's strategic direction.
The new buyback program is a clear signal of GM's confidence in its market strategies, balancing the profitability of its gasoline vehicle segment with the growth of its EV business. The automaker's shares, which have a market capitalization of nearly $54 billion, have climbed approximately 50% since the announcement of the $10 billion stock buyback in late November.
In addition to the buyback program, GM raised its dividend by 33% to 12 cents per share in January. This move aligns with the actions of its competitor, Ford Motor, which committed to returning 40% to 50% of its free cash flow to investors and announced an additional 18 cents-per-share dividend in February.
The broader context of GM's strategy includes a focus on maintaining robust demand for its gasoline-engine vehicles while improving the profitability and market presence of its electric vehicles. This dual focus is crucial as the company navigates the transition towards a more electrified automotive market.
The European Union's scrutiny over Chinese electric vehicle subsidies and the impending tariff decisions are expected to impact the global EV market dynamics. However, GM's robust domestic performance and strategic capital allocation suggest a strong foundation to weather potential market shifts.
