Tag: GM

GM Boosts Shareholder Returns with $6B Buyback and Dividend Hike

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– GM announced a $6B share buyback and a 25% dividend increase to $0.15 per share
– Investors reacted positively, pushing GM stock up over 5% in morning trading
– Company maintains strong R&D spending of $8B+ while navigating potential tariff challenges

General Motors announced a significant boost to shareholder returns on Wednesday, unveiling a new $6 billion share repurchase program and increasing its quarterly dividend. The move comes just weeks after investors expressed disappointment when the automaker’s Q4 earnings call failed to include new capital return initiatives.

GM’s quarterly dividend will rise by $0.03 to $0.15 per share, marking the company’s first dividend increase since 2023. The $6 billion share repurchase authorization includes plans for a $2 billion accelerated share repurchase (ASR) program to be implemented in the near term.

Investors responded positively to the announcement, sending GM shares up more than 5% in morning trading to $49.22.

CEO Mary Barra emphasized the company’s strong execution across all three pillars of its capital allocation strategy. These include reinvesting for profitable growth, maintaining a strong investment-grade balance sheet, and returning capital to shareholders.

This latest buyback program follows GM’s previous $6 billion share repurchase plan and the $10 billion ASR program introduced in late 2023. The earlier initiatives coincided with a 33% dividend increase that took effect in January 2024.

During GM’s most recent earnings call, CFO Paul Jacobson had indicated the company would explore prudent ways to expand shareholder returns. In today’s announcement, he expressed confidence in the business plan and balance sheet strength, noting GM would remain agile in responding to potential policy changes.

Despite the increased focus on shareholder returns, GM confirmed its commitment to continued investment in its core business. The company expects 2025 capital spending to remain between $10-11 billion, including investments in battery manufacturing joint ventures. Research and product development spending is projected to exceed $8 billion for the year.

For fiscal 2025, GM has forecast profits between $13.7 billion and $15.7 billion, with diluted and adjusted earnings per share of $11-12. The company noted these projections don’t account for potential impacts from tariffs that might be implemented by the Trump administration on imported vehicles or parts.

While GM is clearly a large-cap stock, its shareholder-friendly actions could signal a broader trend that might eventually benefit small-cap stocks and the Russell 2000 index. Historically, when large corporations increase dividends and buybacks, it often reflects growing confidence in economic conditions that eventually filters down to smaller companies. The Russell 2000 has underperformed larger indices in recent years, but increased capital returns across the market could indicate improving liquidity conditions that typically benefit smaller firms more dramatically.

Additionally, GM’s ability to maintain robust capital returns while facing potential tariff challenges demonstrates corporate resilience that could reassure investors about smaller domestic manufacturers’ prospects. Many Russell 2000 companies are more domestically focused than their large-cap counterparts, potentially insulating them from international trade disruptions.

The shareholder return increases demonstrate GM’s financial strength despite ongoing challenges in the automotive industry, including electrification costs, competition, and potential trade policy changes. The company’s willingness to boost returns while maintaining substantial investments in future technologies suggests management’s confidence in its long-term business strategy.

As GM navigates the evolving automotive landscape, this balanced approach to capital allocation appears designed to keep both long-term investors and those seeking immediate returns satisfied while the company continues its transition toward an electric future.

GM to Invest $625 Million in Joint Venture to Mine EV Battery Materials, Strengthening U.S. Supply Chain

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– GM partners with Lithium Americas to develop a lithium mining project in Nevada, investing $625 million.
– The Thacker Pass project will boost GM’s efforts to secure domestic lithium for EV battery production.
– The deal is a key step in GM’s goal of building a resilient, U.S.-based EV supply chain.

General Motors (GM) is making a significant move to strengthen its electric vehicle (EV) supply chain by partnering with Lithium Americas Corp. in a joint venture. This collaboration involves a substantial $625 million investment in the Thacker Pass lithium carbonate mining project, located in Humboldt County, Nevada. Lithium is a critical component for manufacturing the high-capacity batteries needed to power EVs, making this deal a pivotal step in GM’s goal of building a resilient, U.S.-based supply chain.

With EV demand surging and federal regulations tightening on emissions, GM is focusing on ensuring a steady and reliable supply of lithium, a key raw material for EV batteries. This partnership, which includes $330 million in cash at closing, $100 million upon final project decisions, and a $195 million credit facility, is designed to secure GM’s access to lithium for its growing fleet of electric vehicles. GM will hold a 38% interest in the Thacker Pass project, which is expected to create significant job opportunities and contribute to cost savings in battery production.

“We’re pleased with the significant progress Lithium Americas is making to help GM achieve our goal to develop a resilient EV material supply chain,” said Jeff Morrison, GM’s senior vice president of global purchasing and supply chain. Securing lithium and other essential raw materials domestically is critical for managing battery costs, providing value to customers, and meeting investor expectations.

This joint venture builds on GM’s earlier $320 million investment into Lithium Americas in February 2023, further cementing their relationship. As the Thacker Pass project moves forward, it will play a crucial role in GM’s ambitious plan to scale its EV business and produce electric vehicles more profitably, in line with tightening U.S. environmental regulations.

This development is particularly timely as it comes amid a broader focus on building out the U.S. EV supply chain. Just yesterday, Wolfspeed, a key player in the EV chip industry, secured a $750 million grant from the U.S. government to enhance its silicon carbide wafer manufacturing for EVs. The Wolfspeed funding aims to expand production capacity and contribute to the growth of energy-efficient technologies for the EV market, which aligns with GM’s efforts in securing lithium.

The Wolfspeed project and GM’s lithium venture highlight the importance of fostering a domestic EV supply chain to reduce reliance on foreign resources, ensuring that the U.S. remains competitive in the global EV race. By linking these two developments, the broader picture of the growing U.S. EV infrastructure comes into view, from essential raw materials like lithium to advanced chip technologies, all designed to power the future of transportation.

As GM continues to push its all-electric vision, its investment in Thacker Pass positions the company to meet the increasing demand for EVs, while simultaneously reducing costs and securing a vital component of the battery production process. With both Wolfspeed and GM making significant strides, the U.S. EV industry is poised for substantial growth in the coming years.

GM Launches $10 Billion Buyback to Appease Shareholders

Posted on by slightbourne@noblecapitalmarkets.com

Facing mounting criticism after production setbacks and labor unrest rattled investor confidence this year, automaker General Motors (GM) is opening the corporate coffers to initiate a massive $10 billion share repurchase program. The move aims to regain Wall Street’s trust by returning billions to shareholders.

Accelerating Buybacks to Prop Up GM Stock

GM shares have sputtered in 2023, down 14% year-to-date heading into Wednesday’s announcement. The stock dove nearly 5% in October when contract negotiations with the United Auto Workers (UAW) broke down into nationwide strikes, forcing GM to suspend guidance. With electric vehicle launches also lagging internal targets, GM hopes to stop the bleeding and inject positive sentiment through shareholder payouts.

The accelerated buyback comes after GM already spent $3.3 billion repurchasing shares so far this year. By expanding repurchases to $10 billion, GM moves aggressively to reduce outstanding shares and boost key per-share metrics like earnings-per-share.

How The $10 Billion GM Buyback Will Work

Rather than spacing out buybacks over several years, GM is frontloading the program to have maximum near-term impact. The company will immediately receive $6.8 billion worth of its shares from the banks underwriting the plan – Bank of America, Goldman Sachs, Barclays and Citibank.

These banks will then repurchase GM shares on the open market over the next six months. The final tally of shares bought back depends on GM’s average share price during that period. If shares remain around current levels in the $37 range, the full $10 billion could retire nearly 270 million shares – almost 20% of GM’s float.

Such large buybacks often drive share prices higher by soaking up excess supply. It also means per-share financial metrics like earnings, cash flow and dividends appear larger with fewer shares outstanding. For GM to hit the upper end of its newly reinstated earnings-per-share guidance range this year, solid buyback execution will be key.

GM Shareholders Get More Cash Too

In tandem with turbocharging buybacks, GM also announced a 33% dividend hike from 9 cents to 12 cents per share annually. Together, these moves signal a shareholder-friendly turn for the automaker after delays in its electric and autonomous programs led to executive departures.

Rather than flashy visionary promises, GM looks to deliver tangible returns now in the form of cold hard cash. These initiatives could take center stage heading into 2024 as leadership emphasizes financial consistency through a period of technological transition.

For income-focused investors and funds, juicier dividends make GM appear more attractive relative to other automakers and electric vehicle pure plays. Combined with reduced shares outstanding, GM’s 4.2% dividend yield will rise even higher, bringing in more potential shareholders.

Outlook Still Uncertain Beyond 2023

An open question is whether GM can sustain enhanced shareholder returns in the years ahead while simultaneously investing billions in next-generation manufacturing and technology. Many bears argue spreading cash so liberally now leaves GM vulnerable to economic shocks down the road.

But with UAW deals running into 2028 and strains from this year mostly wiped clean, GM can campaign on hitting its earnings guidance in 2024 and rewarding loyal shareholders along the way. Where GM goes from there, however, remains clouded in uncertainty.