Wilson: $8B Stock Buyback Would Boost General Motors' Value

Cameron Aubernon
by Cameron Aubernon
We’re committed to finding, researching, and recommending the best products. We earn commissions from purchases you make using links in our articles. Learn more here
wilson 8b stock buyback would boost general motors value

The man who helped General Motors restructure in 2009 now wants the automaker to buy back $8 billion in shares to help boost its value.

Bloomberg reports Harry J. Wilson is asking to not only for a seat on GM’s board, but for the automaker to also agree to said buyback in June, with execution to take place the following year. The move is meant to provide more value for its shareholders, who are frustrated with the automaker’s reluctance to spend some of the $25 billion it has to withstand another recession if necessary.

Wilson believes the automaker could part with $8 billion and still withstand an economic blow like the one that landed it in bankruptcy court six years prior, and is working with four investment funds that hold a total of 34.4 million shares to help make it so. Wilson was tapped by President Barack Obama to help with GM’s restructuring during said bankruptcy.

That said, GM may still be reluctant to spend that much money. Per Morningstar senior equity analyst David Whiston, the company has to be careful amid a weak industry outside of North America. GM also faces the spectre of a large fine paid to the U.S. Department of Justice due to the former’s handling of the February 2014 ignition switch recall, as well as building up its lending arm GM Financial to boost the automaker’s credit rating.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

More by Cameron Aubernon

Join the conversation
5 of 38 comments
  • APaGttH APaGttH on Feb 11, 2015

    Ahhh yes, the stock buyback - awesome for institutional investors and pretty much terrible for everyone else. As others, I'd rather see GM invest $8 billion in great products, fixing the crap storm that is CUE, and make sure things like the ignition switch fiasco never happens versus increasing Bill Lumberg's stock portfolio by 3/4 of a point.

  • Lou_BC Lou_BC on Feb 11, 2015

    I agree with the sentiment that 8 billion would be better spent on R&D and the production of better products.

  • CapVandal CapVandal on Feb 11, 2015

    1. The biggest mistake GM made during its bankruptcy and recapitalization was NOT changing the name. All the owners (shareholders) were completely wiped out during the bankruptcy. The company was recapitalized through bailouts, the government owned the company, and then sold it to new investors by selling stock to the public. 2. Share buybacks are financially equivalent to dividends, except for tax advantages to investors who wish to reinvest the returns in the firm. See any finance 101 textbook to answer questions about this. http://www.amazon.com/Fundamentals-Corporate-Finance-Standard-Educational/dp/0073226394/ref=asap_bc?ie=UTF8 3. Buybacks are equally good for all investors. Individuals, pension funds for individuals, and anyone else that buys or owns stocks directly or indirectly. 4. GM has $20 billion in cash. What should they do it? Give it back to shareholders or invest it in new products? If auto manufacturing is an awful business. Cars are commodities, three is global overcapacity, among other problems with the industry. If GM were in a profitable industry with good prospects, a buyback would make a lot of sense at today's stock price. However, GM has to reinvest its entire earnings just to stay competitive. For the sake of the stakeholders (suppliers, dealers, etc) GM must reinvest the profits in the business just to stay in business. 5. Avoid auto manufacturers as direct investments. Why? Just because.

    • Jim brewer Jim brewer on Feb 11, 2015

      I take it all back. You are right. GM sells for less than 8x earnings. I assume that they pay a small dividend, so that means that part of their capital structure costs 13% or so. That's crazy in today's environment. They also don't have much chance of matching that number in profit margin per car. If nothing else, they are vulnerable to a takeover at that price. Pull in some shares, maybe increase the dividend on the remaining shares to get the price up.

  • Stanczyk Stanczyk on Feb 13, 2015

    Stock Buyback : .. another .. ‘financial instrument’ that pupms ‘stock-exchange’ and ‘their ‘corporate’ virtual value’ .. Let me gues : This guy Harry J. Wilson that’s ‘helping GM’ is from Goldman Sach$ ?!? ..:) .. they’ll go bust 'Greek style'.. Pretty soon they will stop producing things(they won't need machines ,.. they won’t need workers ..) , they will just make financial tricks , .. all of this will end up pretty ugly ..