Wed, Jun 07, 2017 - Page 11 News List

Shareholders to settle GM fight

AP, DETROIT, Michigan

General Motors Co’s (GM) normally tranquil annual meeting could be a contentious affair this year, as an activist investor targets GM’s stagnant stock price.

The US’ No. 1 automaker has posted more than US$42 billion in profits over the past seven years. Yet, the stock has stubbornly hovered near its US$33 initial offering price from November 2010.

That has led investor David Einhorn to propose splitting the stock into two classes: One for capital appreciation, the other for those who want dividends.

Einhorn’s Greenlight Capital hedge fund owns 3.6 percent of GM. The automaker’s management opposes the proposal as too risky.

The fight was to be settled yesterday at the annual meeting, when shareholders vote on the proposal and also elect all 11 company directors.

Greenlight has nominated three of its own candidates to the board.

Greenlight has argued that its plan unlocks tens of billions of US dollars in stock value that has been stuck in the current structure. Despite GM’s profits, cost cuts and investments in future technology, the stock has risen only 4.5 percent since the 2010 initial public offering.

“If shareholders do not insist on action, GM’s incumbent board will continue to do nothing to fix GM’s valuation problem,” Greenlight said in a statement.

However, GM CEO Mary Barra said in a letter to shareholders that there is no evidence that Greenlight’s plan will work and there might not be any demand for the new stock.

The split could also cause GM to lose its investment-grade credit rating, increasing costs for the company and its auto financing arm, Barra wrote.

The company has also said that two independent evaluation firms have analyzed the plan and recommended against it.

Barra has been cutting fixed costs, shedding unprofitable businesses, raising quality and developing products for the future, such as the Chevrolet Bolt, a fully electric car that goes 383km per charge and costs less than US$30,000 with US federal tax credit.

GM has also returned US$18 billion to shareholders in dividends and stock buybacks from 2012 to last year, with another US$7 billion expected this year.

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