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General Motors Company (GM) To Buyback Shares Worth $5 billion And Maintain Free Cash At $20 billion: Phil LeBeau

Reports that emerged earlier today suggests that General Motors Company (NYSE:GM) has decided to repurchase shares worth $5 billion effective immediately. This decision was announced by CEO Mary Barra on Monday. A group of investors has averted a proxy fight over General Motors Company (NYSE:GM)’s balance sheet, and the company announced that it had reached a deal with the investors group, and according to this investor Harry Wilson would drop his bid for a set in General Motors Company (NYSE:GM)’s board. CNBC’s Phil LeBeau reported about the developments on this story on CNBC.

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Wilson originally wanted General Motors Company (NYSE:GM) to return $8 billion to shareholders, but that did not happen as General Motors Company (NYSE:GM) decided to repurchase shares worth $5 billion. General Motors Company (NYSE:GM) stock has done well so far in 2015 with stock price going up by around 5.5% since the beginning of this year.

LeBeau mentioned that General Motors Company (NYSE:GM) has free cash flow around $ 25 billion and has decided to maintain the cash at $20 billion by the end of 2015. He added that General Motors Company (NYSE:GM) has given commitment to maintain the free cash at $20 billion and return the excess to shareholders either through dividends or buybacks.

LeBeau pointed at General Motors Company (NYSE:GM)’s CEO Mary Barra’s statement about the situation with Harry Wilson and the details about company’s balance sheet post the decision to return $5 billion to shareholders.

“We believe in our position to move forward with this framework, because we are executing operationally. I think we have made a lot of progress on delivering our customers and strategy and we are building on that momentum in 2015 from the progress we have made in 2014,” Barra said during conference call on Monday.

 LeBeau pointed that Barra did not answer the question about why General Motors Company (NYSE:GM)’s stock is undervalued. He added that General Motors Company (NYSE:GM)’s board has finally committed to operate with a threshold cash of $20 billion and promised to return the excess to shareholders.

Disclosure: None

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