Investor Puts Himself Up for G.M. Board
Michael J. de la Merced
10, 2015 9:37 am
Wilson in 2010, when he ran for New York State comptroller. He
is seeking a G.M. board seat in an effort to persuade the
company to buy back at least $8 billion in shares by 2016.
Credit Michael Appleton for The New York Times.
Updated, 9:28 p.m. |
Six years ago, Harry J. Wilson was
enlisted by the Obama administration to help overhaul
General Motors as part of a taxpayer-financed bailout.
Now, the former
Goldman Sachs financier is trying to change the automaker once again —
but this time with four big hedge funds on his side.
On Tuesday, Mr. Wilson put himself up
for a seat on the G.M. board, as part of a campaign to persuade the company
to buy back at least $8 billion worth of shares by next year.
The potential board fight is the latest
corporate challenge for General Motors as it wrestles with the biggest
safety crisis in its history and the recall of tens of millions of vehicles.
While the company has regained
financial strength since the bailout and its return to the public markets in
2010, some investors have complained that it has done little for them.
Backing Mr. Wilson are big hedge fund
magnates like David A. Tepper of Appaloosa Management and J. Kyle Bass of
Hayman Capital Management. (Mr. Bass has been calling for big share buybacks
for months.) All told, the investors own a stake of roughly 2 percent. As
part of their arrangement, Mr. Wilson will receive a share of the profits
that the investment generates.
Shares of General Motors rose more than
4 percent on Tuesday.
In an interview, Mr. Wilson conceded
that the company had made huge strides since the bailout, particularly in
changing a corporate culture he derided as broken. But under a succession of
leaders, including its current chief executive, Mary T. Barra, the automaker
has presided under a largely moribund stock price.
“There’s been growing frustration
that’s been coming together,” he said. “We want to help the company go from
where it is today to where it should be, a world-class performer on any
Mary Barra, chief executive of
Credit Tony Ding/Associated Press.
bailout, General Motors has steered a conservative financial course. It has
argued that it needs what it has called a “fortress balance sheet,” one that
includes $25 billion in cash on hand.
Some of that
money has gone toward the costs of the safety crisis. For more than a
decade, company officials knew about but failed to fix defective ignition
switches in millions of small cars. To allay fears that it was neglecting
safety issues, General Motors issued more than 80 recalls last year covering
nearly 30 million vehicles. It spent about $3 billion in 2014 to compensate
accident victims, fix recalled cars and trucks, and reorganize its vast
engineering operations and safety teams.
took a heavy toll on G.M.’s bottom line. Last week, the company reported net
income for 2014 of $2.8 billion, a 31 percent drop from $3.99 billion the
statement, General Motors said that it would evaluate both of Mr. Wilson’s
proposals. It added that it had recently announced plans to raise its
quarterly stock dividend by 20 percent and would announce other plans to pay
out to investors in due course.
Wilson, 43, argued that the company had been too conservative in the
handling of its finances and had failed to improve on other financial
metrics, like operating margin. He said that he had publicly warned G.M.
about the potential of an activist investor emerging as early as the fall of
he approached Ms. Barra at an investor conference, telling her that he had
ideas to share. When they met last week, he laid out several initiatives
aimed at bolstering operating performance and paying out more to
shareholders. He also disclosed that he wanted a seat on the board to serve
as a representative for shareholders.
G.M.’s statement suggested that Mr. Wilson’s move was sudden, he contended
in an interview that he had tried three times to extend the deadline for
nominating directors beyond Monday night at midnight.
analyst said in a research note that the company might decide on a smaller
buyback than Mr. Wilson and his investment group have requested.
needs to work through recall litigation and the U.A.W. negotiations,” Brian
Johnson, an analyst with
Barclays, said, referring to the
United Automobile Workers union.
“However, we believe there is a fair likelihood that G.M. enacts some sort
of share buyback (perhaps $4 billion) to show investors that it is enhancing
ways, Mr. Wilson’s move harkens back to the beginnings of his career as a
financier. Before he joined the Obama administration’s auto task force, he
had worked at Goldman Sachs and the hedge fund Silver Point Capital, where
he became an expert on investing in distressed companies.
time in Washington, he served as the team leader for G.M., supervising the
overhaul of the automaker. It was Mr. Wilson who helped devise the
administration’s tactic to lend the company the billions of dollars it
needed to stay afloat during bankruptcy in exchange for a stake that would
be sold down over time. (The government sold the last of its shares at the
end of 2013.)
leaving the task force, Mr. Wilson ran, unsuccessfully, as the Republican
candidate for New York State comptroller before setting up the Maeva Group,
a corporate turnaround consulting firm. That latest phase of his career has
put him in touch with several notable activist investors, including the
billionaire Daniel S. Loeb, who had him installed on the boards of
Yahoo and the
art auction house Sotheby’s.
years after the auto bailouts, however, Mr. Wilson has remained bothered by
how slowly G.M. has been recovering, according to people close to him.
perfectionist,” said one acquaintance. “It was frustrating him that G.M.
wasn’t getting A-pluses across the board.”
himself did not shy away from the classroom metaphor in discussing how much
room G.M. has to improve.
from a big red ‘F’ before the crisis to much better performance, but they’re
not at the ‘A’ they’re capable of,” he said. “I think Mary has the potential
to get them there, but I think she needs some help.”
February 11, 2015
An earlier version of this article misidentified the Barclays analyst who
wrote about the possibility of a stock buyback by General Motors. He is
Brian Johnson, not Andrew Smith.
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