GM bows to pressure, implements $5bn buy-back
US carmaker GM intends to return all available free-cash-flow to its shareholders while targeting operating margins of up to 10% in the long-term.
GENERAL MOTORS
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General Motors Corp
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10:59 26/04/24
On Monday the firm made that commitment to investors as part of its new capital allocation framework.
During the first quarter of each year, starting from 2016, the company will announce its capital return plans to markets.
In parallel to the introduction of the above framework a group of activist investors led by Harry Wilson announced that it would be withdrawing his candidacy to GM’s board of directors as well as his shareholder proposal.
GM CEO Mary Barra said:“We will continue to invest in innovative technologies and world-class vehicles that will deliver sustained profitable growth and maximize returns to shareholders.”
Detroit, Michigan based GM believes it can drive a 20% or higher return on invested capital (ROIC) while at the same time growing its dividend and maintaining an investment grade balance sheet.
As a part of the above, the manufacturer authorised a $5bn share buy-back programme which was to start immediately.
Another main ingredient of the firm’s new plans was the maintenance of a $20bn cash balance.
2015 guidance reaffirmed
In 2015 the carmaker expected total earnings before interest and tax (EBIT) and EBIT margins to rise in year-on-year terms.
The firm said it is on track to grow 2016 EBIT-adjusted margins in North America to 10%, return to profitability in Europe and maintain strong margins in China.
As well, GM reaffirmed its long-term strategic goal of achieving 9-10% EBIT-adjusted margins by early in the next decade.
The company also committed to future capital spending at between 5-5.5% if annual revenues.
As of 14:35 shares in GM were 2.93% higher at $37.61.