Stan Honda, AFP/Getty Images
General Motors headquarters in the Renaissance Center in Detroit. GM said it will repurchase $5 billion to return cash to shareholders.
General Motors headquarters in the Renaissance Center in Detroit. GM said it will repurchase $5 billion to return cash to shareholders. less
General Motors said this morning that it will repurchase $5 billion in GM shares by the end of 2016. The buyback begins immediately.
In return, Harry Wilson will withdraw his candidacy for the GM board. He represented four hedge funds that were pressing GM to distribute more cash through an $8 billion buyback.
GM shares closed up 3.1% Monday at $37.66.
GM CEO Mary Barra said the buyback "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 a total $10 billion to shareholders by the end of 2016.
Barra, in a conference call with Wall Street analysts after the buyback announcement, said GM's goal is to become "the world's most valued automotive company … return all available free cash flow to investors," realize "20% return on investment or higher" and maintain a cash balance of $20 billion.
Previous target was $20 billion to $25 billion. On hand at the end of 2014, $19 billion.
Of the $20 billion, GM said, $10 billion to $11 billion is needed to survive a recession. Much of the rest is necessary to continue product development and introductions.
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."