GM faces investor demand for slice of $25 billion cash hoard

Thu Feb 12, 2015 8:02pm EST
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By Ben Klayman

DETROIT (Reuters) - An investor group demand that General Motors Co give back more of its $25 billion cash hoard confronts Chief Executive Mary Barra with a challenge to her plans for building the company and rewarding shareholders.

Barra and GM's chief financial officer Chuck Stevens have signaled they will recommend returning more of the cash once the Detroit automaker knows how much it will have to spend to resolve legal issues related to the company's recalls of millions of cars equipped with defective ignition switches. That includes a U.S. Justice Department criminal investigation.

Several shareholders contacted by Reuters said they agree with former U.S. auto task force member Harry Wilson and his hedge fund partners that GM has more cash than it needs. GM exited bankruptcy in 2009 with little debt, and has since profited as demand for cars and trucks in the U.S. has roared back from the 2008-2009 recession.

"Having a very, very strong balance sheet is wise, but we're beyond wisdom and into excess capital," said Grant Taber, portfolio manager at Westwood Management in Dallas, which owns GM shares.

Wilson and a group of hedge funds are pressing GM to buy back $8 billion in stock over the 12 months following its June annual meeting, and agree to give Wilson and possibly other shareholders seats on its board. The group includes David Tepper's Appaloosa Management and three other hedge funds: Taconic Capital Advisors, Hayman Capital Management and HG Vora Capital Management, which together own about 31.2 million shares, or 1.9 percent of GM stock.

GM told Reuters on Thursday it has turned to Morgan Stanley and Goldman Sachs Group Inc to give advice on how to respond to the demands of Wilson's group.

The company hasn't discussed its position regarding Wilson's proposals since revealing them on Tuesday. It said then that its goal was maximizing shareholder value through both boosting its share price and returning cash via dividends and share buybacks.


General Motors CEO Mary Barra speaks next to the 2016 Chevrolet Volt hybrid during the first press preview day of the North American International Auto Show in Detroit, Michigan January 12, 2015.   REUTERS/Rebecca Cook