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GM Authorizes $5 Billion Stock Buyback, Will Return All Cash Over $20 Billion To Shareholders
Doubting if the growth ahead of GM is now over, and the great post-bankruptcy "success story" is rapidly fading as the company has been pushed to resort to the kind of financial engineering which has pushed the S&P higher for all of 2014, and follows a record month of stock buyback announcements? Then doubt no more: moments ago GM announced it is authorizing an immediate $5 billion stock buyback, and plans to return all cash above a $20 billion floor to shareholders.
From the Press Release:
General Motors Co. (GM) today announced a comprehensive capital allocation framework, as improving business performance and strong capital discipline enable increased returns to shareholders. GM said a foundational element of its approach will be to return all available free cash flow to shareholders while it maintains an investment-grade balance sheet underpinned by a target cash balance of $20 billion.
GM also announced that its Board of Directors authorized the initial repurchase of $5 billion in GM shares to begin immediately and conclude before the end of 2016. GM in February announced its intent to increase its quarterly stock dividend to $0.36 per share effective in the second quarter of 2015 as part of the Board's regularly scheduled second quarter 2015 dividend declaration process, which would result in an expected dividend payout of approximately $5 billion through year-end 2016.
"As we continue to execute on our plan to become the most valued automotive company, our track record of improved operating performance, strong earnings momentum, and disciplined capital investments provide the foundation for a comprehensive capital allocation framework," said GM CEO Mary Barra. "We will continue to invest in innovative technologies and world-class vehicles that will deliver sustained profitable growth and maximize returns to shareholders."
GM's capital allocation framework encompasses three core principles:
- High-Return Investment in the Business – GM previously stated it expects capital expenditures in 2015 of $9 billion to invest in future growth, including a more aggressive vehicle launch cadence in the coming years. GM will reinvest in its business with the objective of driving 20 percent or higher return on invested capital (ROIC) through investments in world-class vehicles and leading technology. The company plans to disclose its ROIC performance each quarter beginning with its first quarter 2015 report. The company expects this disciplined capital deployment will strengthen and grow GM's brands and drive improved financial performance and will result in capital spending in the range of 5–5.5 percent of its annual revenue in the future.
- Maintain an Investment-Grade Balance Sheet – GM intends to maintain an investment-grade balance sheet, including a target cash balance of $20 billion. GM believes maintaining an investment-grade balance sheet is critical to support long-term growth and increased earnings at GM Financial, which is a catalyst for improved automotive sales and profitability.
- Return Capital to Shareholders – Beyond reinvesting in the business and maintaining an investment grade balance sheet, the company expects to return all available free cash flow to shareholders. Starting in January 2016, GM will develop its annual capital return plans and communicate them to the market during the first quarter of each year.
In 2014, the company established an executive compensation program that aligns management incentives with ROIC and total shareholder return. GM said it is committed to providing greater clarity around its compensation program and will continue to evaluate the program to ensure that strong linkage.
GM reaffirmed that in 2015 it expects its total earnings before interest and tax (EBIT) adjusted and EBIT-adjusted margin to increase, compared to 2014, after adjusting 2014 for the impact of recall costs. The company reiterated that it is on track to meet its 2016 financial targets to achieve EBIT-adjusted margins in North America of 10 percent; to return to profitability in Europe; and to maintain strong margins in China. It also reaffirmed its long-term strategic plan to achieve 9–10 percent EBIT-adjusted margins by early next decade.
* * *
Why is GM doing this? Because as Goldman's David Kostin announced over the weekend, the only stocks worth buying left are those in which investors frontrun management's own price-indiscriminate purchases of its own corporate shares (and in the case of tech stocks, management is selling while the company is buying).
And just like that March is off on a solid footing to topple February as the record month of stock buyback announcements, which in a world in which S&P 500 revenue growth is now expected to post its first annual decline since Lehman, is the only deus ex to boost earnings per share left.
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Well, there's still room for growth I suppose, the next group to tap will be the Walking Dead..
hahaha , that is all they can do and yet no one questions these moves
BULLISH!
From the company that brought us such great cars as the Citation, EV-1 and Aztek
What,
The day after announcing a 700,000 car recall !!
GM should be required to pay back the 12 billion the government wrote off before anything else happens. Must be nice to give money to shareholders before they pay back the money to the taxpayers!
Wasn't it $49bn ?
A little over $26 billion was the final loss when gov sold their holdings in Dec 2014
Comrades, what are you smoking? It must be good stuff.
Why doesnt MSM cover the ELIO?
.
Gay looking or not - $6,800; 84mpg.
http://www.eliomotors.com/
.
Main point is, you dont hear anything about it even though a few 10K have been ordered.
They are probably non-union and/or are a perceived threat to the 'too big to fail' crowd - no MSM coverage
Actually we (citizens of US) LOST over $26 billion since the Gov sold all its GM holdings in December of 2014, so technically GM doesn't owe us anything. They are done fucking us - for now.
Kinda like the bailed out banks giving everyone their bonuses.
And pay back the bond holders they fucked over.
What about the tax payers who bailed this bitch out? Where's our give backs?
10% NIRP auto loans for everyone!!!!!!
That's cool as long as I don't have to buy a GM car with it.
You can create your own hell, but you can't force me to live in it.
They're working on that
Buy a FORD comrade
Ford To Roll Out 6 New Models in Russia
Ford Launches EcoSport In Russia For Production In Naberezhniye Chelny
How QE is lauded by the establishment as a "success" is beyond me. QE encourages more and more financialization of the economy rather than re-investing in the real economy through business lending, wage increases and capex. 0% QE money is borrowed and pumped through stock buybacks and other financial wizardy for quick bucks, profiting the wealthy disproportionately.
The system needs to be fought and questioned more and more, and often it takes violent uprising to bring back justice to society. Nobody has ever voted themselves to freedom, only freedumb. Real freedom is fought for.
The system needs to be fought and questioned more and more, and often it takes violent uprising to bring back justice to society
Good people aren't going to violently react over money.... at least not until they're starving.
Most are too ignorant to even understand the monetary machinations that take place.
You have to fight, for your right,........... too paaaaaarrrty.
Somehow this must be bullish! Futures now green!
This is how it's supposed to work.
Cash for new Clunkers.
82 month financing for clunkers.
insane madness.
We should kill banksters, they are worse than gangsters
Must be a signal they're about to go down the toilet. Push their cash out to shareholders, eliminating the buffer to weather the coming downturn. That way they can go to Uncle Sucker with their hands out again for the next bankruptcy.
UAW windfall...what % do they own?
IS THIS GM BUYBACK SENSITIVE TO A RATE HIKE FROM THE FED ??
Who would've thought the manufacturer of the greeat american shitbox, that went up in smoke if not forced down the throats of taxpayers in 2008, would now have cash to burn?
The rigged system works I tell ya. It's a modern day success story!
GM takes loans. They don't make money. Let the looting begin!
How about lower the fucking prices 50% !!!
That's a problem when you still have to warrenty your junk for 7 years.
Went to look at new Yukon, I had purchased one in 2004, the price for a similar Yukon was $75,000 over a 30% increase in price. Love that deflation worry - F' that!
50% LOL!!!! These pieces of shit shouldn't cost more than mid-range washer/drier combo.
GM still owes billions to the US citizens and how about buying back my original GM stock that became worthless.
It didn't become worthless until YOU drove it off the lot.
How are things .... in Putin's Slobinski Prospekt Tractor Works .... they have never paid a dividend ? Bunch of friggin' Socialislamists !
Use Socialist devices to destroy an economy .... then blame it on Capitalism .... modus operandi of brain dead leftists !
I wouldn't buy a GM product. Never. I say this as a current UAW dues paying worker.
"more aggressive vehicle launch cadence in the coming years"
Laugh track deafening
"More agressive vesicle launch cadence !" .... jacking off - the short strokes ! LOL Wasn't my "Yen Baby" extra lucent the other day on the dollar crunch story ?
Are they using debt to finance the stock buyback?
More jobs for financial engineers, more pink slips for mechanical engineers.
People are a liability on Wall Street.
It's perpetual stock price growth and debt is what it's all about now.
Who cares about when it has to end and it unravels.
Everyone is playing the same Wall Street game.
Rather than re-investing in the company just plow 90% of earnings into stock buy-backs to boost shares and give out dividends.
When this game is forced to stop it won't end well.
Guess all them recalls were healthier for it than I was lead to believe.
UAW Inc. isn't buying shares .... of the company .... they tried to destroy ?
So, Yellen will prop of the stock price "until they can get back on their feet" right?
just another co. operating on the fed. 101 financial system, hiding behind the word capitalism.
put your share-holders on the hook for a few billion, while you take your billions out the backdoor.
they'll give the share-holders a few pennies, which will amount to a few more % of stock devaluation, on top of the 50% over valued now, when TSHF.
personally I don't see GM surviving the crash, they'll come out owned by china.
We don't need no stinkin' R&D!
I worked for a tech company which recruited this brilliant 'financial engineering' expert to improve the bottom line. He did. Laid off lots of R&D people, added sales staff and bought back shares. Share price rocketed and bottom line showed spectacular improvement, He left after two years having trousered millions for his 'success'. The company never recovered, although it's still there.