Leaders of General Motors Corp. stated on Nov. 29 that for the term of the employees’ new contract, the firm would incur $575 more in labor costs for every vehicle produced due to the recently resolved United Auto Workers strike.
Speaking to analysts following the announcement that General Motors Corp will buy back $10 billion of its stock and increase its quarterly dividend by a third, Chair and CEO Mary Barra and CFO Paul Jacobson expressed their expectation that the company will be able to fully offset the $1.1 billion operating earnings impact of the strike in 2024 through a variety of savings measures.
Due to the six-week labor stoppage, General Motors was unable to build around 95,000 vehicles; the most affected models were the Chevrolet Colorado and General Motors Corp Canyon pickups, as well as the Chevrolet Traverse and Buick Enclave crossovers.
In the long term, according to Barra and Jacobson, the new contracts for UAW workers will cost GM $9.3 billion, of which $200 million will be incurred in the latter portion of this year and $1.5 billion in 2024. Some of the cost-cutting measures to cover those costs have been in place for a few quarters and are expected to save $2 billion by the end of the following year.
Other cost-cutting measures will come from reducing capital spending, which will include postponing the expansion of GM’s Orion Township plant to accommodate electric vehicles and spending less on the company’s Cruise autonomous vehicle group, which has recalled its fleet following an accident in San Francisco involving one of its vehicles.
Analysts were informed by Jacobson that GM saved $500 million in the third quarter by cutting costs on marketing, engineering, and salaries. This is a move that the business plans to replicate in the last three months of this year. He said that capital investment over the medium term will fall between $11 billion and $12 billion per year; the corporation had previously projected as much as $13 billion. These savings will be applied to additional cost-cutting measures, which Jacobson has been pounding home in public since the beginning of the year.
“I’m sure we can hang onto those savings because the HR team is working hard on organizational design,” Jacobson mentioned. We are examining engineering. We are examining design. We are conducting an administrative review of the entire organization to ensure that we maintain our current level of efficiency and savings.
Barra found comfort in the news that other automakers, like Honda and Hyundai, have lately increased worker wages in response to rising labor expenses; she stated that the General Motors Corp team had anticipated this development. Speaking about the repurchase and dividend actions, Barra and Jacobson also adhered to their mid-term profitability targets and stated that GM’s larger transition to becoming an EV-focused firm is still on track, despite pointing out the execution blunders at Cruise and with the expansion of GM’s Ultium battery venture.
Barra stated, “We are much further along than the market is giving us credit for.”
The announcement of the dividend and buyback had the intended immediate effect on General Motors Corp shares: They were up almost 10% to about $32 (Ticker: GM) in late morning trade, which was their best level in almost two months. Though they haven’t increased much over the last six months, GM’s market value is currently at $43 billion.
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