General Motors (GM) said Wednesday that it will not only earn a bigger profit this year than previously expected, it also will boost a stock repurchase program from $5 billion to $9 billion and raise its quarterly dividend from 36 to 38 cents per share.
"We
made significant progress executing our strategic plan and the results
are being demonstrated through our improved earnings," CEO Mary Barra said in a statement.
The automaker's top executives — Barra, President Dan Ammann and Chief Financial Officer Chuck Stevens — presented their 2016 outlook Wednesday morning at the Deutsche Bank auto industry conference in Detroit.
Specifically,
they indicated GM expects to earn between $5.25 and $5.75 a share this
year, up from previous guidance of between $5.00 and $5.50 a share.
Expanding
the share repurchase program by $4 billion comes about 10 months after
the first $5 billion was initiated in response to pressure from a group
of four hedge funds who argued that GM's shares were undervalued.
Shares
of General Motors surged almost 5% in pre-market trading. Its stock
has fallen 11% in the first seven trading days of 2016.
The
optimism comes after the industry's record U.S. sales of 17.5 million
new vehicles with expectations of even better results this year.
There is some uncertainty in China from recent stock market declines
there, but GM will tell investors that it expects its sales to continue
growing there.
"It's going to be more volatile (in China)," Barra
said. "As the market there continues to mature we have opportunities in
the aftermarket and finance."
Despite slower economic growth in
China, GM expects to bring its global pre-tax profit margin to between
9% and 10% of sales by early next decade. It is earning more than 10%
now in North America, but not in any other region. It has been losing
money in Europe for at least 15 years, but expects to be profitable
there in 2016.
Barra also expressed confidence that new forms of mobility such as
car and ride-sharing are more of an opportunity than a threat. Last week
GM announced a $500 million investment in ride-sharing service Lyft.
"We
will continue to keep the customer at the center of everything we do,"
she said. "We are making the right investments and taking the actions
necessary to lead in the transformation of personal mobility."
In
that vein, GM also will extend an online service known as
"Shop-Click-Drive" to consumers. This offers about 30,000 low-mileage
(fewer than 37,000 miles) end-of-lease, daily rental and company-owned
vehicles.
Ammann said GM and other automakers are seeing an
increase in vehicles coming off three and four-year leases. Many will be
resold at auction. But expanding Shop-Click-Drive is a way to offer
those returning vehicles directly to consumers and bolster the prices of
the vehicles.
Consumers will be able to compare the sticker prices on these used vehicles with the fair book value as compiled by Kelley Blue Book. They also will have able to get a Carfax vehicle history report.
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