General Motors has had a rough year with record numbers of recalls for ignition issues. And now they are facing disgruntled investors ready for a proxy fight. To calm the anger of the investors, the company is going to buy back $5 billion in stock giving support to the stock.
The company put the plan together with the group that oversaw its government bailout recently. Harry J Wilson, discussed with the board of directors at GM the feeling from hedge funds that the cash reserves of the company, $25 billion, should be given back to investors in some format. He felt $8 billion was a number the company could handle without disrupting operations. Hedge funds currently own 2% of the stock.
Wilson was ready to get a seat on the board and start the proxy fight for the stock buyback before the company agreed this week. The stock moved higher on the news of the buyback that should conclude within 12 months. The buyback will not affect new product roll-outs, recall expense payments, or Europe restructuring according to the company.
GM Announces $5B Stock Buyback, Avoids Proxy Fight