GM to repurchase $5 billion shares to resolve proxy fight

GM to repurchase $5 billion shares to resolve proxy fight

Automotive giant General Motors will purchase $5 billion shares stock and will be returning cash worth $20 billion to shareholders over the next few years. GM took this step in order to resolve dispute with investors and it also approved a plan in an attempt to boost its share price that has remained unchanged for some time.

The decision was taken after discussions took place between the company and an investment group, which is led by Harry J. Wilson. The group is a part of the government task force, which managed the company's $49 billion bailout few years back.

Last month, Mr. Wilson said that GM can purchase as much as $8 billion in stock without harming its vehicle programs and other projects. If the company had refused, Mr. Wilson would have prepared to begin a proxy fight to get more support from shareholders for a buyback.

But the decision came as a surprise to everyone and the company easily accepted Mr. Wilson's deal. Mr. Wilson said in an interview that he was amazed at how GM's chief executive Mary T. Barra tackled this and it tells a lot about her general style and management approach.

The decision was not much expected, but it came as a quick resolution. According to Mr. Wilson, after this decision, there is no need to get a board seat so as to follow an activist agenda.

"We really feel this is the right framework for the company, as we continue to execute our plan to become the most valued automotive company", Ms. Barra said at a news briefing on Monday at company headquarters.

The share buyback will start shortly and finish before the end of 2016. The decision is good news for investors. Shares of GM increased 97 cents, or 2.7%, to $37.51 in midday trading.