On Monday, General Motors announced it will launch a $5 billion share buyback in an attempt to avoid a proxy war with investors.
GM said it reached a deal with an investor group that will avoid a proxy war over its governance and balance sheet in a deal that may allocate investors more cash. As a part of the deal, investment group leader Harry Wilson will stop his attempt to get a seat on the board, Reuters reported.
General Motors also confirmed it will increase its quarterly dividend to 36 cents a share, up from 30 cents a share, in line with its plans announced last month.
Combined, these actions are estimated to return around $10 billion to shareholders through next year.
Some investors have expressed their frustration with the company’s approach, as its shares have remained near $33, the same price set at its post-bankruptcy IPO in 2010. In pre-market Monday trading, CNBC reported that shares were up 2.6% to $37.78.
[quote text_size=”small” author=”– Mary Barra” author_title=”GM Chief Executive Officer”]
We will continue to invest in innovative technologies and world-class vehicles that will deliver sustained profitable growth and maximize returns to shareholders.
[/quote]
Since the company’s 2009 government-led bankruptcy, GM has built up about $25 billion in cash, while its sales and profits have rebounded.
GM said it will now aim for $20 billion in cash on its balance sheet, while returning free cash flow beyond that level to shareholders. GM Chief Financial Officer Chuck Stevens said this amount should be sufficient to allow the company to manage through another recession.
General Motors is still under investigation by the Department of Justice over its mishandling of recalls in relation to the deadly ignition switch defect in older vehicles. GM also faces a separate challenge in bankruptcy court in connection with the recalls.
In November, Arizona sued General Motors over the recalls, claiming the company put its consumers at risk.
