Shareholders to settle General Motors' fight with activist investor

Shareholders to settle General Motors' fight with activist investor

Shareholders to settle General Motors' fight with activist investor

The hedge fund billionaire essentially wants to split GM's stock into two classes - one designed for big dividend returns and another created to reward shareholders if the automaker's profits and stock price grows - and plans to nominate his own slate of directors. GM shares have appreciated only about 4 percent since the company returned to the public markets in November of 2010 after bankruptcy.

"We are disappointed that shareholders have elected to maintain the status quo", Einhorn said in a statement on Tuesday.

Einhorn made his proposal as U.S. industry sales of new vehicles had begun to wane after a boom cycle that has lasted since 2010.

Silicon Valley electric vehicle maker Tesla surpassed GM's market value earlier in 2017, reflecting investor confidence that, despite heavy losses, Tesla CEO Elon Musk had a better strategy, as the vehicle industry shifted to ride services and electric, autonomous vehicles. "We believe GM stock is undervalued", she said, adding that the company is focused on "action to maximise returns and enhance long-term value for our shareholders".

Preliminary voting results indicate overwhelming rejection of a plan first floated in March by Mr. Einhorn's Greenlight Capital Inc., which included a class of stock that pays dividends and a second that paid all additional earnings to growth investors. He also said the company is leasing too many cars and its dealer inventory is too large, circumstances reminiscent of before GM went into bankruptcy protection in 2009.

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But right at the outset, rating agencies said Einhorn's plan could negatively impact the automaker's credit rating and he failed to rally other shareholders to his cause. Shareholders also voted down Mr. Einhorn's slate of three proposed directors, instead opting to re-elect GM's 11 incumbent directors that the USA auto giant proposed.

Still, GM could remain susceptible to future activist moves if Ms. Barra can't lift the share price.

"While Greenlight would have liked to have increased their influence over GM's financial management, it's unfair to conclude from today's vote that the fund will not be successful in its investment over the medium term", Schloetzer said.

Over several months, Einhorn vigorously argued that his scheme would unlock billions in value for GM shareholders.