Online Share Market News

GM to buy back $5 billion in shares by end of 2016

General Motors said this morning it will repurchase $5 billion in GM shares by the end of 2016. The buy-back begins immediately. In return, Harry Wilson will withdraw his candidacy for the GM board. He represented four hedge funds who were pressing GM to distribute more cash through an $8 billion buy-back. GM shares opened at $37.58, up 74 cents or 2%. That was down about two bits from pre-market trades.general-motors-building-560

GM CEO Mary Barra said the buy-back “was something we were working on,” and wasn’t a direct result of the outside pressure. “We looked at what was right for the company and what was right for all our shareholders….It was a proposal we developed,” she said, emphasizing the “we” — meaning GM. Combined with a dividend boost announced in February, to 36 cents a share from 30 cents, beginning in the second quarter, GM said it will be distributing $10 billion to shareholders by the end of 2016.

Barra, in a conference call with Wall Street analysts after the buy-back announcement , said GM’s goal is to become “the world’s most valued automotive company‚Ķ.return all available free cash flow to investors,” realize “20% return on investment or higher,” and maintain a cash balance of $20 billion. Of that, $10 billion to $11 billion is needed to survive a recession, GM said. Much of the rest is necessary to continue product development and introductions.

In fact, GM said, it could drop that cash-balance floor as the automaker becomes more efficient. A GM statement quoted Wilson: “Today’s announcement by General Motors represents the culmination of a constructive dialogue between our investor group, senior management and the Board. As a result of this dialogue, we have arrived at a win-win outcome…”