DETROIT — A business line General Motors pioneered nearly a century ago is expected to begin significantly contributing to the company's future, providing a fount of profits to fund investments in emerging technologies such as electrified and autonomous vehicles.
GM Financial, the company's captive auto financing arm, paid GM a $375 million dividend on Oct. 30 that will be reflected in the GM's fourth-quarter earnings. It's the first in a series of annual payouts GM Financial will pay GM until it consistently holds 50 percent of GM retail sales penetration in the U.S., which is expected to occur in the early 2020s.
The dividend, according to GM CFO Dhivya Suryadevara, will strengthen long-term cash generation and free cash flow — targeted to be $4 billion to end 2018.
"Combined with the ongoing GM Financial dividend and our focus on cost reduction, we see significant opportunity to improve cash generation," she told analysts when discussing third-quarter earnings on Oct. 31. "We are confident in the opportunity ahead of us and continue to expect strong performance over the short term as well as the long term."
GM Financial refers to its leverage ratio — measured as the ratio of net earning assets to tangible net worth — to determine how and when to send capital back to GM.