GM sees profits growing US$2 billion this year and plans buybacks

[WASHINGTON] General Motors expects profits to grow as much as US$2 billion this year and plans to return more of that to shareholders with a higher dividend and buybacks, fuelled by demand for its highest margin vehicles.

Adjusted earnings before interest and taxes this year will range from US$13 billion to US$15 billion, which is higher than last year’s US$12.7 billion, the company said on Tuesday (Jan 27) in a statement that also detailed fourth-quarter results. GM made US$2.51 a share in the latest quarter, a result that easily beat Wall Street analysts’ consensus forecast of US$2.28.

GM’s new guidance rests on selling more of its largest trucks and SUVs such as its GMC Sierra and Cadillac Escalade – and fewer electric vehicles. Legacy automaker profits are getting a boost as President Donald Trump has watered down Biden-era fuel economy rules, allowing them to sell more gas guzzlers without paying fines or having to buy EV credits from the likes of Tesla.

The Detroit-based manufacturer also said it authorised US$6 billion in share buybacks and an increase in its quarterly dividend by 3 US cents to 18 US cents a share. GM has bought back more than US$20 billion in shares over the past several years, which has helped pushed the stock up to all-time highs. 

“We expect the US new vehicle market will continue to be resilient,” GM chief executive officer Mary Barra said in a letter to shareholders. “Looking ahead, we are operating in a US regulatory and policy environment that is increasingly aligned.”

GM’s ongoing buyback plan was in question after the automaker earlier this month said it would take an additional charge related to its ailing electric vehicle operations, bringing its total write-down to some US$7.6 billion. On Tuesday, Barra said she remains confident in “in our path to EV profitability.”  

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Revenue in the latest quarter came to US$45.3 billion, compared with analysts’ estimates for US$45.4 billion. That came after it posted a 6.9 per cent drop in sales last quarter on weaker demand for EVs and cheaper models such as the Chevrolet Trax. BLOOMBERG