GM may have he mortgaged his future last week.
On Wednesday, the automaker announced it would raise its dividend and buy back $10 billion worth of its shares, effectively erasing this year's net income and then some. The move pleased shareholders, as GM shares are trading about 10% higher than before the financial engineering measures were announced.
But shareholder delight may be fleeting. Profits from sales of fossil fuel vehicles are supposed to fund the transition to electric vehicles, GM Chairman Mark Reuss said last year. That no longer appears to be the case, in part because the company is desperate to shore up its stock price, which is the same as it was five years ago.
CEO Mary Barra probably thinks the market is being unfair given that the company, with the exception of a few quarters, has been profitable for more than a decade. The stock buybacks are undoubtedly a ploy to lift GM out of its doldrums.
Any boost the buybacks give to the stock price will only mask the likely reason shareholders are lukewarm on GM: the company lacks the ability to execute its plans.
