Heads up, Phoenix, Houston and Dallas: Cruise is back in town.
Cruise LLC, General Motors (G.M.) The autonomous vehicle company said Tuesday that it has resumed manual driving in these cities.
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Additionally, supervised autonomous driving with a safety driver is underway in Phoenix and Dallas, the company said.
California regulators had revoked the company's permission to test and operate self-driving vehicles in San Francisco after Cruise initially misrepresented an October incident in which one of its vehicles struck a pedestrian.
A law firm hired to review Cruise's security protocols found that video footage of the incident was inadvertently withheld.
Cruise recently agreed to pay at least $8 million to settle the case with the pedestrian, who was dragged 20 feet in San Francisco after being hit by a hit-and-run driver.
The company's co-founders, Kyle Vogt and Daniel Kan, resigned in November, and nine key leaders were fired in December when the company said it would cut about 24% of its workforce.
GM has lost $8.2 billion on Cruise since 2017, and $3.48 billion was lost in 2023 alone, according to The edge.
However, GM Chief Financial Officer Paul Jacobson said Tuesday at the Deutsche Bank Global Automotive Industry Conference that the automaker would pump $850 million into Cruise to help cover the robotaxi company's operating costs. .
GM: share buyback and union agreement
The last few days have been quite busy for GM and analysts have responded accordingly.
On Monday, United Autoworkers said it had reached a tentative local agreement with a factory in northeast Ohio that supplies battery cells for GM electric vehicles.
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Workers at Ultium Cells, a joint venture between GM and South Korea-based battery company LG Energy Solution, voted to unionize in December 2022.
“Eighteen months ago, this company was on a slow path toward poverty wages, unsafe conditions and a dark future for battery workers in America,” UAW President Shawn Fain said in a news release.
“The Ultium workers said, 'Hell no,' and they organized and fought back. “They have now more than doubled their salaries at the end of this contract, secured record health and safety language, and shown the world what it means to achieve a just transition.”
Meanwhile, Jacobson said the automaker expected 2024 EV sales of 200,000 to 250,000 units, with the upper end of the estimate lowered to 300,000.
Jacobson said GM still believed it could realize “positive variable profits” on its electric vehicles in the “low 200,000” production range, according to the Detroit Free Press.
Variable profit occurs when the income that GM obtains from the sale of a vehicle exceeds the direct cost of producing it.
“We think we can still do that probably in the fourth quarter, more so than the second half,” Jacobson said of achieving a positive variable profit. “But we still think it's an achievable goal in the future.”
Despite slower-than-expected EV demand growth across the industry, Jacobson said, GM had strong EV sales in May, selling about 9,500 in the month.
And then GM said its board had approved a $6 billion share buyback program.
“We are very focused on the profitability of our (internal combustion engine) business, we are growing and improving the profitability of our electric vehicle business and deploying our capital efficiently,” Jacobson said in a statement. “This allows us to continue returning cash to shareholders.”
In November 2023, GM unveiled an accelerated share buyback worth $10 billion, while still having about $1.4 billion in remaining capacity under its prior share buyback authorization.
The street professionals Stephen Guilfoyle said the quarter appears to be going quite well for General Motors and its CEO, Mary Barra.
Analyst sees 'encouraging development'
“My sticking point is: Why refinance short-term debt at inflated rates and run a robust share buyback program?” he said.
“It may have been more fiscally prudent and disciplined to use free cash flow for the second quarter and perhaps beyond to try to reduce debt due this year and leave the old buyback authorization in place,” Guilfoyle added. .
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In April, GM released first-quarter results that decisively beat expectations in terms of both revenue and results.
The company also raised its guidance for net income, adjusted earnings before interest and taxes, auto free cash flow and earnings per share.
GM is scheduled to report its second-quarter results on July 23, and Wall Street expects earnings per share of about $2.65 at the midpoint of an estimate range of $2.30 to $2.85.
Citi analyst Itay Michaeli affirmed a buy rating on General Motors with a $96 price target after the company announced a share buyback and that it expects to exhaust the remainder of its pre-clearance by the end of the second quarter.
The termination of the pre-clearance and re-clearance implies modestly larger buybacks than Citi is modeling, the analyst tells investors in a research note.
Michaeli noted that the company's press release also mentioned “strong growth in revenue, margins and free cash flow” and that GM was “growing and improving” the profitability of electric vehicles.
The analyst said he viewed the news as an “encouraging development” that supported the investment firm's GM thesis.
Analysts at Bank of America Securities said that in addition to General Motors' increased buybacks and dividends, Jacobson said GM expects second-quarter earnings to be “better” than the first quarter, which the firm said would is “directionally consistent with our model” and “suggests there might even be advantages.”
The firm said “there is a long road ahead to drive further potential advantages and the potential to make difficult strategic decisions.” He maintains a buy rating and $75 price target on GM shares.
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