Of all the great rivalries throughout time, whether it be sports or business, or something else, you'd be hard pressed to find as great a rivalry as Ford Motor Company (F -0.20%) and General Motors (GM -1.88%). While the two are fierce competitors, they often have similar strategies, and their stocks often trade together.
That hasn't been the case over the past year, with GM rising roughly 45% while Ford declined 15%. What gives?
What have you done for me lately
Scratching at the surface of the question won't give you any answers. For instance, Ford's total U.S. sales increased 4% during 2024, compared to the prior year, to nearly 2.1 million vehicles. General Motors also posted a 4% sales gain in the U.S. for 2.7 million vehicles -- both posting their highest total since 2019.
Both even excelled with electric vehicle (EV) sales, the hot topic of late. GM posted sales of 42,000 electric vehicles during the fourth quarter. That result was up 10,000 vehicles from the third quarter, and almost twice that of the second quarter. Ford also posted a healthy 35% gain in EV sales to nearly 98,000 vehicles in 2024.
If you dig a little deeper, there's definitely a difference in the automakers' financial performance during 2024. Ford missed earnings estimates during the second and third quarters, largely blamed on quality issues and rising warranty costs, while General Motors topped earnings estimates in those same quarters while also raising its guidance multiple times throughout the year.
But there's another big difference between the two, and it could be a large driving force behind the gap in General Motors' and Ford's stock price swings.
Share buybacks
Unlike Ford, which prefers to return value to shareholders through its dividend, General Motors has made share buybacks a big part of its strategy. In fact, in November 2023 the company authorized a $10 billion accelerated share repurchase plan. It then followed that up with a separate $6 billion share repurchase authorization in June 2024. You can see the impact that's had in the graph below, with GM's shares outstanding in sharp decline.
GM Shares Outstanding data by YCharts
In the next graphic, you can see that as abruptly as GM began repurchasing shares, its stock began to take off. That's to be expected to some degree as earnings are distributed to fewer shares, thus pushing up the earnings-per-share value.
Can investors expect a Ford buyback?
When competitors see their rival have success with a strategy, it's likely to be copied to some extent. Investors might ask themselves if Ford could start a share buyback program to the extent GM has, but shouldn't count on it. That's because the Ford family owns a special class of shares that hold special voting rights, but also receive dividends -- it's well known the Ford family loves its dividends.
For that reason, it's unlikely that Ford will implement a share buyback program even with the success GM seems to be having with its strategy. Ford would be more apt to put money into the dividend that benefits the Ford family, as well as investors, rather than put money into a share repurchase program.
