GM may have He mortgaged his future last week.
The automaker announced Wednesday that it would boost its dividend and buy back $10 billion worth of its stock, effectively wiping out this year’s net income and then some. The move pleased shareholders, with GM shares trading nearly 10% higher than before the financial engineering steps were announced.
But shareholders’ joy may be fleeting. GM President Mark Reuss said last year that profits from fossil fuel vehicle sales should fund the shift to electric cars. That doesn’t seem to be the case anymore, in part because the company desperately wants to prop up its stock price, which is the same price it was five years ago.
CEO Mary Barra probably thinks the market is unfair considering that the company, except for a few quarters, has been profitable for more than a decade. There is no doubt that the stock buybacks are a ploy to get GM off the hook.
Any boost that buybacks give the stock price will only mask a possible reason why shareholders are lukewarm toward GM: the company lacks the ability to execute on its plans.