General Motors has revealed it lost $1.1 billion as result of the historic United Auto Workers strike and will cut spending in its automated driving unit and slash electric vehicle production to cover new union contracts.
On Wednesday, the automaker reinstated its full-year earnings forecast that was withdrawn after the union started targeting its factories with strikes on September 15.
The strike lasted until October 30 when General Motors and the United Auto Workers reached a tentative agreement on contracts including include a 25 percent hourly pay raise plus cost-of-living allowances over the more-than-four-year contract.
The automaker said the $1.1 billion loss primarily came from lost production due to the strike, but expects to absorb the costs of the new contract and is even raising its dividend.
‘GM will deliver very strong profits in 2023 thanks to an exceptional portfolio of vehicles that customers love and our operating discipline,’ said General Motors Chair and CEO Mary Barra.
General Motors CEO Mary Barra (pictured) said the company has plans to offset the costs of the UAW strike and new contract
The automaker said the historic United Auto Workers strike cost the company $1.1 billion primarily due to lost production
‘We are finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs.’
She added, ‘With this clear path forward, and our strong balance sheet, we will return significant capital to shareholders.’
The company now predicts full-year net income of $9.1 billion to $9.7 billion, down from its previous outlook of $9.3 billion to $10.7 billion.
However, they expect to generate more cash for the full year. It expects free cash flow of $10.5 billion to $11.5 billion, an increase from a previous forecast of $7 billion to $9 billion.
General Motors plans to cut capital spending, including a slowdown in spending on electric vehicles and at Cruise, its troubled autonomous vehicle unit.
California regulators revoked the San Francisco-based subsidiary’s robotaxi license last month after one of its vehicles dragged a pedestrian to the side of a street after the person was hit by another car.
‘We expect the pace of Cruise’s expansion to be more deliberate when operations resume, resulting in substantially lower spending in 2024 than in 2023,’ Barra said Wednesday at an investor conference, reported The New York Times.
As part of their plan to cut costs, General Motors will slowdown in spending on electric vehicles and at Cruise, its troubled autonomous vehicle unit
Last month, California revoked licenses for the self driving car following an incident where a passenger was trapped beneath a Cruise taxi for 30 minutes
‘We must rebuild trust with regulators at the local, state and federal levels, as well as with the first responders and the communities in which Cruise will operate.’
The CEO said, ‘What Cruise has accomplished in the eight years since we acquired the company is remarkable. Our priority now is to focus the team on safety, transparency and accountability.’
After the permits were revoked, Cruise founder and CEO Kyle Vogt and subsequently chief product officer Dan Kan resigned from their positions.
When General Motors bought the company it had been expecting annual revenue of $1 billion from Cruise by 2025 – a big jump from the $106 million last year.
During the first nine months of this year Cruise posted pretax losses of $1.9 billion.
Barra also said in a letter to investors that she is disappointed in the pace of electric vehicle production, which she attributed to difficulties in assembling batteries.
However, she said General Motors has made improvements in the organization responsible for the work, and the company expects higher EV production and improved profit margins next year.
Barra said she is disappointed in the pace of electric vehicle production, which she said is because of difficulties assembling batteries
‘While the rate of growth for EVs is slowing in the near term, it is projected to accelerate and grow substantially in the long term as customers have more EV choices, and the public charging network expands,’ Barra said.
Earlier in the year GM delayed electric pickup truck production at a factory north of Detroit until 2025 as the growth rate in electric vehicle sales slowed.
The automaker also said it will raise its dividend 33 percent to 12 cents per share starting in January. It’s also planning to buy back $10 billion of its shares.
Shares of General Motors rose nearly 11 percent after the stock buy back was announced, but remains down about 27 percent in the past year.