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Market Share, Margins Expected to Rise, GM Takes Another Step Towards Fully Restoring Dividend

Company declares dividend while CFO says new vehicles will drive up profits.

by on Jan.15, 2013

GM Chief Financial Officer Dan Ammann said the company expects profits to increase because of its new products.

This story has been revised to reflect an earlier GM preferred stock dividend payment.

General Motors will pay a dividend on its preferred stock, it announced Tuesday afternoon. The decision appears to have been backed up by GM’s anticipation of its 12th quarterly profit in a row – as well as the expectation that the maker will be able to drive up sales, margins and profits in the coming year.

The news comes less than a week after Ford Motor Co. revealed plans to double its own dividend on common stock.

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“Our portfolio of new, world-class vehicles puts us on a strong footing to grow profitably,” said Dan Ammann, GM senior vice president and chief financial officer, who addressed an industry conference in Detroit as the announcement of the new dividend payment was released.

“We’re launching more vehicles globally than at any time in our history and some of our most important models are targeting the two largest markets in the world – the U.S. and China,” he said.

GM plans to pay a dividend of just under six cents a share on its Series B mandatory convertible junior preferred stock. Many industry analysts have been anticipating such a move, especially in light of Ford’s effort to rebuild its own dividend. When the smaller of the two makers announced a five-cent divided in December 2012 it was quickly rewarded with an upgrade in its credit rating, something that GM CEO Dan Ackerson has listed among his own high priorities.

GM first began paying a dividend on its preferred stock last autumn.  It remains to be seen when, rather than whether, GM will also announce its own dividend for common stockholders. There were some signs that this delay was a disappointment to some investors, GM stock weakening in after-hours trading.  But it has risen sharply in recent weeks, jumping from less than $25 a share in mid-December to close at $30.60 in regular Tuesday trading.

That is still about 7% off of the strike price set during the maker’s November 2010 IPO but signs suggest it is moving in the right direction, several analysts indicated.

Amman’s comments at the Deutsche Bank 2013 Global Industry Conference in Detroit capped a strong showing by GM at the North American International Auto Show in Detroit. The maker received raves on Sunday night when, during an auto show sneak peek, it revealed its much-anticipated 2014 Chevrolet Corvette sports car.  On Monday, it won further kudos for the updated version of its Chevy Silverado pickup.

And the new Cadillac ATS, a compact sports sedan designed to go up against the likes of the vaunted BMW 3-Series, was named North American Car of the Year by a panel of 49 U.S. and Canadian journalists during the auto show’s opening ceremony.

Amman appeared to be trying to put a positive spin on the mixed results the maker achieved in 2012. Its Chevrolet division achieved record global sales of nearly 5 million, the maker reaching 9.2 million.  But market share slipped both on a global scale and in North America.

During several interviews at the Detroit Auto Show, senior officials downplayed that setback and noted that they decided to accept a lower market share rather than lose “discipline,” suggested Chevrolet Marketing Chief Alan Batey. In years past, the maker ran up incentives and ruined its margins to prop up sales, he noted, a major factor in its 2009 bankruptcy.

GM canceled its dividend in July 2008, as its finances began faltering and U.S. auto sales began sliding towards their worst recession in more than half a century.

The maker has tried to use the NAIAS and concurrent industry conferences to portray itself as a very different company from one that survived Chapter 11 only with the help of a massive government bailout.

One of the key differences is the growth of its overseas operations. In 2003, barely a third of Chevy sales came from outside the U.S., for example.  That’s expected to reach two-thirds this year.

Amman said he expects demand to grow in most markets – though Europe remains a weak point after 14 consecutive annual losses.

Some of the key vehicles the maker is launching around the world this year will include not only the Silverado and GMC Sierra full-size pickups and the Chevy Corvette, but also a new version of the Cadillac CTS in North America, the Opel Adam, Cascada and Mokka, and Chevrolet Trax in Europe; the Chevrolet Onix and Spin in South America; and the Cadillac XTS and Chevrolet Sail in China.

 

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