GM Executives Detail UAW Deals’ $575-per-Car Costs

General Motors Corp.’s leaders on Nov. 29 said the recently resolved United Auto Workers strike will add $575 in labor costs to each vehicle the company makes over the life of employees’ new contract.

Speaking to analysts after announcing that GM will hike its quarterly dividend by a third and buy back $10 billion of its stock, Chair and CEO Mary Barra and CFO Paul Jacobson said they expect the company will be able to completely offset the strike’s $1.1 billion operating earnings impact in 2024 via a range of savings. GM did not produce about 95,000 vehicles because of the six-week work stoppage, with the Chevrolet Colorado and GMC Canyon trucks and Chevrolet Traverse and Buick Enclave crossovers being most affected.

In the longer term, Barra and Jacobson said UAW workers’ new contracts will add $9.3 billion to GM’s costs—with $200 million hitting in what remains of this year and $1.5 billion coming in 2024. Some of the savings initiatives to absorb those expenses have been underway for several quarters and are on track to generate $2 billion in savings by the end of next year while other cutbacks will come from lowering capital spending (including by pushing out the electric-vehicle expansion at GM’s Orion Township plant in Michigan) and putting less money toward the growth of the company’s Cruise autonomous-vehicle group, which has recalled its fleet in the wake of a San Franciso accident involving one of its cars.

Jacobson told analysts that lower spending on marketing, engineering and wages saved GM $500 million in the third quarter, something the company will repeat in the last three months of this year. Capital spending over the medium term, he added, will be between $11 billion and $12 billion annually; the company’s previous guidance had been for up to $13 billion. Those savings will be combined with other efforts to control expenses—something Jacobson has been hammering on publicly since early this year.

“There’s a lot of work that the HR team is doing around organizational design and I feel confident that we’ll be able to hold onto those savings,” Jacobson said. “We’re looking at engineering. We’re looking at design. We’re looking across the organization administratively to make sure that we continue to drive those savings and that efficiency.”

Addressing the higher labor costs, Barra took solace in the fact that other auto makers such as Honda and Hyundai have followed suit recently in raising their workers’ wages, something she said the GM team had expected. Speaking to the buyback and dividend moves while noting the execution stumbles at Cruise and with the scaling up of GM’s Ultium battery venture, Barra and Jacobson also stuck to their mid-term profitability targets and said GM’s broader shift to becoming an EV-focused company remains on track.

“We are much further along than the market is giving us credit for,” Barra said.

The dividend and buyback announcement had the desired short-term impact on GM shares: In late-morning trading, they were up about 10% to nearly $32 (Ticker: GM), their highest point in nearly two months. Over the past six months, however, they’re still down slightly; GM’s market capitalization is now about $43 billion.