Investor seeks $8B GM stock buyback, seat on board

AP News
Posted: Feb 10, 2015 6:22 PM

DETROIT (AP) — A member of the government task force that restructured General Motors after its 2009 bankruptcy is seeking a seat on the company's board and at least an $8 billion stock buyback. And Harry Wilson says his push for change won't stop there.

Wilson, 43, who served on the Obama administration's autos task force, represents four hedge funds that own 34.4 million GM shares, about 2.1 percent of the company.

He disclosed his plans in a meeting with GM CEO Mary Barra on Feb. 3 and filed notice of his board candidacy in a letter on Monday. Shareholders will get a chance to vote for him this summer at GM's annual meeting, which normally takes place in June.

In an interview with The Associated Press, Wilson said shareholders are frustrated with GM because it's an underperforming company with substantial cash that needs help reaching its potential. "They are not a very good steward of capital," Wilson said.

GM, which posted a $2.8 billion profit last year despite massive recall costs, ended the year with $25.2 billion in cash available.

Before a jump in the stock price after raising the dividend last week, GM "had not generated a dollar of net value for shareholders," Wilson said. GM shares were trading around $33, about the same price as its post-bankruptcy public offering in November of 2010, he said.

The company, he said, has not improved its profit margins appreciably, and is behind other automakers in working with parts supply companies to develop more models off fewer car and truck architectures.

Wilson said he can draw on knowledge of GM from his days on the task force and his experience on public company boards including Yahoo Inc., Visteon Corp., an auto parts maker; and YRC Worldwide Inc., a trucking company, to help GM perform better.

He respects Barra and isn't looking for a management change, Wilson said. He told her during their meeting that she can't be a great CEO without giving shareholders great value. "I think she was surprised," he said. "She basically indicated that she would talk to people about it and circle back with me."

If GM doesn't change, Wilson said, the group that includes Taconic Parties, Appaloosa Parties, HG Vora Parties and Hayman Parties will take its concerns to other shareholders. "Our view is we're going to press this as much as necessary to help the company reach its full potential," he said.

GM said in a statement that Wilson's letter to the company shows he'll get a percentage of the group's profits from its investment in the Detroit automaker.

GM restored its quarterly dividend in January of 2014 for the first time in six years. Last week the company announced it would raise the dividend 20 percent in the second quarter to 36 cents, pending board approval. The chief financial officer said it could go even higher once GM gets a better handle on recall costs.

Company executives often talk about returning cash to shareholders. But they also repeatedly have touted a "fortress balance sheet" with enough cash to weather an economic downturn such as the Great Recession, which sent the company into bankruptcy protection.

The board and management have "demonstrated their ongoing commitment to return value to shareholders" through the dividend. GM management, the statement said, is open to ideas to boost shareholder value and has a plan to build a strong long-term business.

Shares of General Motors Co. closed Tuesday up $1.52, or 4.2 percent, at $37.52. The stock is up about 7.5 percent in the year to date, while the benchmark S&P 500 index is roughly flat.