Executives at the automaker view the company's stock as fundamentally undervalued, even as auto sales cool
By Sharon Terlep
General Motors' board approved a $20 billion stock buyback plan, a move to boost a stock price executives view as stubbornly undervalued.
The company said Tuesday the authorization allows it to buy back shares at any time. Already, GM has repurchased nearly $30 billion in shares in the last five years.
The automaker's share price is up more than 40% from a year ago but has barely moved this year and lags behind the S&P 500. The company trades at a lower price-to-earnings ratio than rival Ford, a sign that Wall Street is cool on GM despite its cash flow and earnings.
GM shares fell 5% in morning trading Tuesday despite the buyback move. Wall Street had hoped GM would raise its earnings forecast, but instead the company narrowed guidance for the year and warned of a bumpy 2027.
Wall Street's lack of confidence irks GM executives, who have spent years trying to rebrand the automaker as a tech-forward powerhouse -- complete with Silicon Valley executives and forays into autonomous vehicles -- rather than an old-school manufacturer vulnerable to cyclical downturns.
The biggest U.S. automaker has been returning billions to investors even as high interest rates, soaring gas prices and trade wars rattle the global auto industry. Executives are trying to convince Wall Street that GM can generate piles of cash while still pouring money into new vehicles and technology.
GM is betting that Americans' affinity for big trucks and SUVs will hold up amid high gas prices and economic uncertainty. The company is spending billions to increase production of its biggest, priciest vehicles, while rolling out V-8 engines, new pickups and high-end Cadillacs.
The model has worked so far: Even as GM sells fewer vehicles overall, it's generating more revenue as it sells pricier models and resists discounting to juice sales. GM on Tuesday said revenue rose 3% in the third quarter.
"The path forward is more challenging," GM Chief Executive Officer Mary Barra said in a call with analysts.
Analysts fret over GM's stagnating sales volumes and tightening consumer budgets. Commodity costs are rising, consumers are squeezed by inflation and GM is launching new pickup trucks -- a complex, high-stakes endeavor.
Barra said the company can handle the upheaval and deliver stronger results next year -- provided demand holds up and costs stabilize.
The company this week plans to update its progress on bringing eyes-off, hands-free automated driving assistance to market in 2028, a goal it set last year as executives dialed back electric-vehicle ambitions in the wake of regulatory rollbacks championed by President Trump.
GM said it has bought back nearly $43 billion in shares over the last decade, reducing common shares outstanding by 45% over that time. In announcing the latest repurchase, GM said it completed a $6 billion share buyback announced in January.
Barra, in a CNBC interview this month, said she thinks GM shares are fundamentally undervalued and that she has given priority to shareholder returns in her 12-year tenure leading the Detroit automaker.
Company spending, she said, "has gotta generate a return, because this is our owners' money."