GM Chief Wins Time To Bolster Shares -- WSJ
June 07 2017 - 3:02AM
Dow Jones News
Shareholders rebuff activist investor; CEO Mary Barra nods to
'undervalued' stock
By Mike Colias
General Motors Co. shareholders signaled continued patience with
Chief Executive Mary Barra's attempts to boost a languishing share
price, rejecting hedge-fund manager David Einhorn's proposal to
split the company's stock into two classes.
More than 90% of GM investors casting ballots at the company's
annual meeting Tuesday rejected a plan floated in March by Mr.
Einhorn's Greenlight Capital Inc. that aimed to shake up GM's
capital structure. The plan called for a class of stock that pays
dividends and a second that paid all additional earnings growth to
investors.
Shareholders also overwhelmingly voted down Mr. Einhorn's slate
of three proposed directors, instead opting to re-elect 11
incumbent directors backed by the U.S. auto giant.
The results are the latest victory for Ms. Barra, a 55-year-old
executive who has taken swift action to help the company emerge
from a safety crisis, fend off activist investors and sever
underperforming businesses. While GM's stock has declined more than
10% during Ms. Barra's three-plus years at the helm, she has eased
investor concerns by producing consistent financial results and
implementing a series of share buybacks.
Ms. Barra, speaking with reporters, indicated she isn't ignoring
GM's "undervalued" shares, which remain stuck near the $33 initial
public offering price from 2010 and performing among the cheapest
in the S&P 500 on a price-to-earnings-ratio basis.
"We have to keep earning our way," Ms. Barra said. She
emphasized GM must "outperform" peers amid a slowdown in the U.S.
market, a challenge analysts have flagged as a key reason for its
struggles.
Ms. Barra, who is chairman in addition to CEO, led the boardroom
fight against Mr. Einhorn's dual-class idea, claiming it amounted
to financial engineering that would have hampered the company's
ability to manage cyclical downturns and invest in future
technologies. In 2015, before being named chairman, she rallied
directors and her management team to fend off a separate group of
investors demanding billions in share buybacks and board
representation.
GM has encountered various speed bumps since Ms. Barra took over
for Dan Akerson, an auto industry outsider who was appointed to
GM's board during the government-funded bankruptcy of the company
in 2009. Mr. Akerson left GM's CEO job in January 2014 after three
years, leaving Ms. Barra to deal with an ignition-switch safety
recall that presented a management crisis and cost billions of
dollars to resolve, denting the auto maker's reputation.
In a statement, Mr. Einhorn expressed disappointment that
shareholders "elected to maintain the status quo" over what he
called a "creative idea" to unlock value in GM's stock. He
congratulated the management team on its latest "win."
Shares of GM were little changed at $34.43 on Tuesday. GM's
market valuation of $51.8 billion trails Tesla Inc.'s $57.6 billion
valuation, an indication that Wall Street prizes future growth
opportunities over near-term profit.
Detroit auto makers are under mounting pressure to respond to a
growing threat from tech companies developing electric cars and
self-driving vehicles. Ford Motor Co. in May ousted its chief
executive, Mark Fields, who like Ms. Barra took over in 2014 after
a career climbing the ranks. He was replaced by Jim Hackett, an
industry outsider who had served on Ford's board.
GM generally has gotten more credit than Ford for its bets on
future growth areas where Tesla and other Silicon Valley companies
are seen as having an edge. That includes last year's roughly $1
billion acquisition of autonomous-vehicle developer Cruise
Automation, which helps GM's attract tech talent and equip the auto
maker to combat Alphabet Inc. and other tech companies looking to
compete in the car business.
The rejection of Mr. Einhorn's plan won't end the debate over
how GM can better perform on the stock market. Some analysts have
floated the idea of the creation of a tracking stock for
longer-term and potentially higher-growth businesses such as Cruise
and GM's in-car concierge service OnStar.
"If GM successfully builds out its autonomous/mobility
solutions/services and starts recording revenue, we believe a
tracking stock of those efforts could unlock value," RBC Capital
analyst Joseph Spak wrote in a March note to investors.
Ms. Barra said GM continues to look at different structures that
could attract growth investors, but also cautioned many of the
tech-based pieces of the business are intertwined with GM's broader
vehicle-making efforts.
"We regularly continue to evaluate many different ideas to
unlock that value, but also recognizing some of the connectivity"
between areas such as self-driving cars and GM's electric-vehicle
program, she said.
In addition to tech investments, GM has been exiting markets
where profits have been hard to come by. The auto maker left Russia
in 2015, and is in the process of selling operations in Europe and
South Africa. In May, it said it would no longer sell cars in
India, a market expected to grow significantly in coming years.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
June 07, 2017 02:47 ET (06:47 GMT)
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