General Motors raises 2016 guidance, dividend

GM ups 2016 earnings guidance

Following what will be one of its most profitable years ever in North America, General Motors raised its earnings guidance for 2016, while also dramatically increasing its stock buyback program and its quarterly dividend.

"Our overall financial outlook for 2016 is based on a strong product launch cadence, growth in adjacent businesses, modest industry growth and aggressive efforts to drive efficiencies," said Mary Barra, chairman and CEO of General Motors.

The General Motors logo on the world headquarters building in Detroit.
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In 2016, GM expects to earn between $5.25 and $5.75 a share. Its guidance for 2016 had previously called for between $5 and $5.50 a share. Meanwhile, the automaker increased its stock buyback program by $4 billion, bringing it to a total of $9 billion.

Finally, General Motors has raised its quarterly dividend by 6 percent, to $0.38 per share, beginning in the first quarter of this year.

The improved financial outlook comes two years after Barra took over as CEO of the country's largest automaker. Early on, her tenure was dominated by a scandal involving defective ignition switches, which has cost General Motors $1.5 billion and severely damaged the automaker's reputation.

Since announcing a settlement with the U.S. Department of Justice last year, Barra and her executive team have been making news for posting stronger earnings and repositioning the automaker for future growth.

While its business in North America remains the primary profit driver for GM, the company's China operation is also critical to its profit outlook.

The recent instability of the Chinese stock market and growing concerns about the strength of the consumer there has some investors wondering if a slowdown could be a threat to to the automaker's long-term profitability.

Barra admits the pace of growth in the Chinese auto market may be moderating, but said GM is still positioned to do well in that country.

"The China team has already demonstrated the capability to respond to more volatile markets [and] size the business right," she said. "So we are very positive about China but recognize it will be slower growth and it will be more volatile."

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