GM might have mortgaged its future final week.
On Wednesday, the automaker introduced that it could increase its dividend and purchase again $10 billion value of its shares, successfully erasing this yr’s internet earnings after which some. The transfer happy shareholders, with GM’s inventory buying and selling about 10% larger than earlier than the monetary engineering strikes had been introduced.
However shareholders’ delight could also be fleeting. Earnings from gross sales of fossil gas autos are presupposed to bankroll the transition to electrical autos, GM president Mark Reuss stated final yr. That doesn’t look like the case anymore, partially as a result of the corporate is determined to prop up its share value, which is similar because it was 5 years in the past.
CEO Mary Barra in all probability thinks the market is being unfair on condition that the corporate has, aside from just a few quarters, been worthwhile for greater than a decade. The share buybacks are undoubtedly a ploy to wrench GM out of its rut.
Any increase the buybacks give to the share value will solely paper over the doubtless purpose shareholders are lukewarm on GM: The corporate lacks the flexibility to execute on its plans.