GM Deploys Historic Buybacks After UAW Strike

With labor and demand pressure mounting, GM has deployed emergency capital measures

BREAKING NEWS

After a few months of negative news hammering their stock, GM has finally started altering course with some wild announcements this morning. Along with great projections for Q4, GM also will be buying back 25% of their company. Let's dive in: 

WHAT HAPPENED

GM is pulling out all the stops to increase shareholder value in the wake of ratifying a new deal with the UAW and the sudden setbacks suffered by their Cruise robotaxi play. The biggest deal here is GM's massive initiation of an accelerated share buyback program that will total $10 billion. That's effectively 25% of the company GM is repurchasing in an effort to generate returns for shareholders. 

CAPITAL CONTROL

GM is able to pull off such a significant buyback thanks to some intense cost controls initiated during the UAW strike. Management announced they managed to boost Free Cash Flow guidance to $11.5 billion on the high end. Given that The Street was expecting GM to pull off a figure more in the neighborhood of $7.8 billion, this is a massive result. 

More importantly, GM is also projecting a better-than-expected profit range of $11.7 billion to $12.7 billion. Pre-strike, GM was guiding a wider range of $12 to $14 billion, so while labor issues hurt their profitability overall, it wasn't nearly as bad as investors feared. 

WHY IT MATTERS

GM has been hurting thanks to 4 straight months of bad news. All the factors that were weighing on GM stock are now lifting and management is starting to mount a turnaround. GM is also boosting their dividend a little, but that yield is lagging behind Ford. This makes sense since GM usually prefers to utilize buybacks as a tool to return shareholder value instead of just a dividend. With all this positive pressure, GM is effectively announcing that the bad times are over and the company is ready to push back toward growth. There isn't a lot this market loves more than buybacks and profit news, so GM stock soared 8% in early trading.