General Motors, the third largest automaker in the world and the biggest in the United States announced it concluded negotiations with some of its investors and will avert a proxy fight by introducing a $5 billion share buyback program.
The plan that was detailed also included additional promises of allocating even more cash to stockholders – in an effort to avert an oncoming proxy war with a group of investors that were discontent of the company’s balance and governance. The group was lead by Harry Wilson, an activist investor that also took part back in the government appointed task force that helped GM out of bankruptcy reorganization after 2009. Wilson agreed with the automaker to cease his efforts to gain a seat on the carmaker’s management board come June’s annual shareholder meeting.
Wilson declared himself satisfied of the company’s new financial plan, adding it would offer investors a more transparent approach to GM’s cash investment proposals. The company added yesterday it would increase its quarterly dividend to 36 cents a share from 30 cents previously after first discussing the plan last month. All actions undertaken by the automaker now could yield investors a return of cash of around $10 billion through 2016.
From now on, the carmaker agreed it would seek to keep $20 billion in cash on its balance sheet and anything beyond that would be returned to investors – with the framework dependant on GM’s maintenance of an investment grade balance sheet. GM Chief Financial Officer Chuck Stevens added the $20 billion in cash would be enough to help the automaker survive in case of another recession.