The largest US automaker recently announced that an investor group has demanded the company divest a larger portion of its $25 billion cash hoard to shareholders – in the form of an $8 billion share buyback program.
The attitude represents one of the first signals that investors are dissatisfied with Chief Executive Mary Barra and her management team’s plans for the company. Former US auto task force member Harry Wilson and a group of hedge fund partners believe the company has more cash then needed and the former announced it would also nominate himself as a board member when new elections are held at the annual shareholder meeting in June. Barra and GM’s chief financial officer Chuck Stevens have hinted they intend to introduce measures to increase the cash return to shareholders after the Detroit carmaker resolves legal issues surrounding last year’s outrageous ignition switch recall debacle.
Some shareholders, asked about whether GM has more cash than needed have agreed to Wilson’s pledge, saying GM has gone through the bankruptcy restructuring procedure and came out with little debt, while cash stockpiles grew as the company rode the US auto market revival. “Having a very, very strong balance sheet is wise, but we’re beyond wisdom and into excess capital,” comments Grant Taber, portfolio manager at Westwood Management in Dallas, an owner of GM shares. The largest US automaker and the third biggest in the world has already turned to banks such as Morgan Stanley and Goldman Sachs for advice on how to address the situations and to the demands of Wilson’s investor group.