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General Motors Co raises 2016 profit outlook, boosts share buybacks, dividend

A General Motors Co. Chevrolet Cruze vehicle on display during the 2016 North American International Auto Show. GM said on Wednesday it will return more cash to shareholders by raising its stock buyback program by 80 per cent to US$9 billion and increasing its dividend.

DETROIT — General Motors Co said on Wednesday it will return more cash to shareholders by raising its stock buyback program by 80 per cent to US$9 billion and increasing its dividend, sending shares up 4.6 per cent in premarket trading.

GM also raised its 2016 earnings per share forecast to US$5.25 and US$5.75 per share from a previous 2016 outlook made in October of between US$5.00 and US$5.50 per share.

GM executives outlined a plan to give back to shareholders a total of US$16 billion for the period from 2015 through 2017. In March 2015, GM agreed to return a total of US$10 billion in share repurchases and increased dividends through the end of 2016.

Investors appeared to cheer GM’s plans in premarket trading, boosting shares by 4.6 per cent to US$31.70 per share in the minutes after the company’s announcement.

By contrast, investors sold Ford Motor Co stock Tuesday evening after the Dearborn, Michigan, automaker said it would pay a special dividend of US$1 billion, but cautioned that margins in its North American auto market could hit a plateau at about 9.5 per cent.

Ford shares were down about 1 per cent in premarket trading, at US$12.71.

Taken together, the back-to-back presentations by the two automakers at a conference on the sidelines of the Detroit auto show set up a referendum for investors on which of the two U.S. automakers has the better strategy to weather a cyclical downshift in vehicle sales growth, increasing costs to meet regulatory demands and technology-driven challenges from self-driving vehicles and car sharing.

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