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GM says strike cost $1.1B, but rising labour costs can be handled, raising dividend

by Associated Press   

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To get there, GM expects to cut capital spending, including a slowdown in spending on electric vehicles and at Cruise, its troubled autonomous vehicle unit.

General Motors says pretax earnings took a $1.1 billion hit this year from a six-week strike by autoworkers, but the company expects to absorb the costs of a new contract and is even raising its dividend.

The Detroit automaker on Nov. 29 reinstated its full-year earnings forecast that was withdrawn after the United Auto Workers began targeting the factories of Detroit automakers with strikes on Sept. 15. Those strikes continued at GM until Oct. 30.

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. But GM expects 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.

To get there, GM expects 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.

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Barra wrote that GM expects the pace of Cruise’s expansion to cities outside of San Francisco to be more deliberate when driverless taxi operations resume “resulting in substantially lower spending in 2024 than in 2023.”

GM had big plans for Cruise, which it bought eight years ago. The Detroit automaker 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.

GM says it will raise its dividend 33% to 12 cents per share starting in January. It’s also planning to buy back $10 billion of its shares.

GM, as well as rivals Ford and Jeep maker Stellantis, agreed to new contracts with the UAW that raise top assembly plant worker pay by about 33% by the time the deals expire in April of 2028. The new contracts also ended some lower tiers of wages, gave raises to temporary workers and shortened the time it takes for full-time workers to get to the top of the pay scale.

At the end of the contract top-scale assembly workers will make about $42 per hour, plus they’ll get annual profit-sharing checks.

UAW President Shawn Fain said during the contract talks that labor costs are only 4% to 5% of a vehicle’s costs, and that the companies were making billions and could afford to pay workers more.

Barra, who will update shareholders on company finances, conceded in a letter to investors that she’s disappointed in the pace of electric vehicle production, which she attributed to difficulties in assembling batteries.

But she wrote that GM has made improvements in the organization responsible for the work, and the company expects higher EV production and improved profit margins next year.

“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 wrote.

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