General Motors announced yesterday that it will be buying back $5 billion of its own shares, a move that the company was hoping to avoid for as long as possible. Why? Because by doing this, GM is now going to be responsible for paying out some fat cash to the investors that backed them post-bankruptcy.
And get this… The only reason that GM is now on-board with this plan has nothing to do with loyalty or appreciation. No, it is only because they were completely slapped around by a Mr. Harry J. Wilson.
Well, in addition to being a leading member of the government task force that initially helped bail the company out, Wilson is also the leader of the company’s most powerful investment group. Yeah, that means you don’t want to mess with this guy. GM, unfortunately, found this out the hard way.
According to reports, Wilson last month threatened GM and CEO Mary Barra, saying that if the company did not buy back its stocks that he would make an effort to be elected to the company’s board of directors, a move– by the way– that he was more than capable of pulling off.
GM, not being able to handle the Shaft-like bitch slap, folded like a house of cards.
In an official press release, Wilson said yesterday, “Today’s announcement by General Motors represents the culmination of a constructive dialogue between our investor group, senior management and the Board. As a result of this dialogue, we have arrived at a win-win outcome that includes a thoughtful approach to critical capital allocation issues and other important measures to increase long-term shareholder value.”
Those are the classy words of a true pimp.
So, what does this mean for GM??
Well, over the last few years, GM has been storing up a stockpile of money (which insiders have estimated to be around $25 billion) while stocks have hovered around $33 per share– the same price right after their post-bankruptcy public offering back in 2010!!
With this new deal, however, GM will finally have to dole out a payoff and will reportedly be returning about $10 billion back to the shareholders. That equals a pretty bad day for GM’s fat cats.
But get this; things are getting laughably worse.
“The union is going to say, ‘Don’t tell us no, because you didn’t say no earlier when you could have saved several billion dollars in your arrangement with Wilson,” said Gary Chaison– a professor of labor relations at Clark University in Worcester, Massachusetts– in an interview with Bloomberg. “You managed to spend in March very easily.’”
Can anyone feel another bitch slap coming?? I think so!