GM’s Positive Outlook Boosts Shares: CEO Barra Promises More Cash and PHEVs

In a recent letter to investors, GM Chief Executive Mary Barra shared an optimistic view for 2024, prompting a surge in General Motors’ shares. Barra expressed confidence in the resilience of the U.S. economy, job market, and auto sales, signaling that more capital would be returned to shareholders.

Shareholder Benefits and Upbeat Forecast

GM’s shares experienced an 8.7% boost in early trading, driven by Barra’s commitment to reducing shares outstanding to below 1 billion, from the current 1.2 billion and the post-IPO peak of 1.6 billion. Barra emphasized the company’s focus on returning cash to shareholders, detailing plans for a $10 billion share buyback and a 33% dividend increase, totaling $12 billion in 2023.

“The ICE Machine is Up and Running Again”

While acknowledging the challenges in EV deliveries, GM remains optimistic about the demand for combustion trucks and SUVs in North America. Barra highlighted the importance of flexible production, allowing the company to adapt between internal combustion engine (ICE) and electric vehicle (EV) manufacturing.

Embracing Plug-in Hybrid Vehicles in North America

In a notable shift, Barra announced GM’s intention to launch plug-in hybrid vehicles in North America, deviating from its previous strategy of bypassing hybrid powertrains. This move aligns with the company’s goal to meet fuel economy and emission standards efficiently.

Challenges and Tough Decisions

During the discussion, analysts raised concerns about GM’s EV and self-driving strategies, as well as declining sales in China. Barra reassured investors that “nothing is off the table” as the company aims to protect profitability. GM will delay its investor day to address significant changes within the company and challenges faced by Cruise, its autonomous vehicle unit.

Cost-cutting and Profit Forecast

GM’s 2024 forecast predicts adjusted pre-tax profits of $12 billion to $14 billion, with a focus on cost-cutting measures. The company plans to reduce marketing spending by $400 million and has already cut $200 million from product development costs. GM expects its electric vehicle operations to turn a variable profit by the second half of the year.

Challenges in China and Cruise Revamp

Despite facing challenges in China, where domestic automakers and Tesla are gaining ground, GM remains committed to the market. Barra acknowledged the need to work through inventory challenges in the first quarter. Additionally, the Cruise robo-taxi unit will undergo a revamp and cost reduction after operational setbacks in 2023.

In conclusion, GM’s positive outlook, shareholder-focused initiatives, and strategic shifts demonstrate the company’s commitment to navigating challenges and adapting to the evolving automotive landscape.