GM $20 billion buyback fails to stop 7% slide on cost warning

A new GM $20 billion buyback could not hold the stock up on Tuesday, Oct. 20. General Motors beat third-quarter profit forecasts, yet its shares fell 6.84% to $77.09, the worst performance in the S&P 500 that day, after the carmaker narrowed its outlook and flagged higher costs.

What happened

Adjusted earnings before interest and tax rose 22% from a year earlier to $4.1 billion, or $3.70 a share, above the $3.63 that analysts expected, according to LSEG data cited by Reuters. North America generated $3.6 billion of that total. Net income attributable to stockholders was $3.3 billion, up about $2 billion.

GM now sees 2026 adjusted EPS of $12.75 to $13.75 and adjusted EBIT of $14.5 billion to $15.5 billion. In July it had guided to $12 to $14 a share. The new midpoint of $13.25 is below the $13.41 consensus, CNBC reported. Adjusted automotive free cash flow guidance went up to $11.5 billion to $12.5 billion.

The board approved the multiyear repurchase after GM finished a $6 billion program announced in January. It gave no deadline for completing the new plan. GM's repurchases since 2023 total about $29.5 billion.

Why it matters

Costs are the worry. GM expects commodity inflation of around $2 billion this year, the top of its earlier range, including higher prices for logistics and DRAM memory chips. CFO Paul Jacobson said steel, aluminum and freight costs rose sharply in the past two months and could weigh on profit by another $2 billion next year if they stay high. Producer prices had already pointed that way, as our September PPI report showed.

Analysts were split on how worried to be. J.P. Morgan said investors "are likely to question conviction for now" given higher costs and doubts over whether GM can keep selling such a rich mix of expensive trucks. Jacobson, for his part, said "the consumer has held up remarkably well" and that GM had seen nothing pointing to weakness. GM still expects next year to be better, but it called the path "more challenging."

Tariffs are expected at the low end of a $2.5 billion to $3.5 billion range, while warranty costs are tracking the high end. CFRA analyst Garrett Nelson said the selloff mainly reflected the guidance midpoint, and he pointed to GM's lack of hybrids, which now make up more than 15% of U.S. sales. The GM $20 billion buyback supports per-share earnings, but it does not change those cost lines.

What's next

The fourth quarter should be weaker, as GM delivers fewer pickups ahead of redesigned Chevrolet Silverado and GMC Sierra models. Its EV pullback charges are "substantially completed," at $11.2 billion since the second half of last year, according to CNBC's report.

GM said it has paid $4.6 billion of an expected $7.4 billion in cash for that EV retreat through the third quarter, so part of the bill is still to come.

Consumer prices are the other test. Jacobson said pricing has been flat while costs rise, and GM will decide next year whether to pass more of them on, a choice tied to the inflation path set out in our September CPI coverage. How fast GM uses the GM $20 billion buyback may depend on that answer.