DETROIT, March 28, 2017 /PRNewswire/ --
- GM's Board and management executing transformational plan that
is delivering shareholder value
- Greenlight's proposal to eliminate GM's common dividend to fund
separate dividend on an unprecedented security creates unacceptable
risks and is not in best interests of shareholders
- GM expects to return approximately $7
billion in cash to shareholders in 2017, bringing total cash
returns to shareholders to approximately $25
billion since 2012
General Motors Co. (NYSE: GM) confirmed today that its Board of
Directors and management team have thoroughly analyzed and rejected
a non-binding proposal that Greenlight Capital intends to submit
for a vote at GM's 2017 annual meeting of shareholders. The
proposal relates to eliminating the dividend on the existing GM
common stock and distributing an unprecedented new dividend-focused
security ("dividend security"), thereby creating a dual-class
common stock structure. In connection with its proposal, Greenlight
has also nominated a slate of four candidates for election to GM's
Board of Directors.
GM values the views of its owners, and has engaged directly with
Greenlight on numerous occasions during the past seven months,
including a meeting between Greenlight and members of the company's
Board. After careful due diligence, including consultation with the
rating agencies and independent analysis from three top-tier
investment banks, the Board and management are confident that
eliminating the dividend on the existing GM common stock and
distributing the proposed new "dividend security" creates an
unacceptable level of risk and would not serve the best interests
of GM shareholders.
These risks include:
- The loss of GM's investment grade credit rating;
- Unknown and uncertain market demand and liquidity for the
proposed securities, resulting in depressed pricing and selling
pressure;
- Unproven and entirely speculative valuation impact; and
- Material governance challenges arising from two classes of
stock with divergent objectives.
"GM's Board and management are fundamentally transforming our
company by executing a plan that is delivering record financial and
operating results and returning significant capital to our
shareholders," said Mary Barra, GM
chairman and CEO. "For seven months, we've extensively reviewed the
proposed dual-class structure, as well as other capital allocation
strategies, and concluded that continuing to execute our strategy
and adhering to our current disciplined capital allocation
framework is the best path to deliver increased value.
"Our Board and management remain laser focused on advancing our
progress and creating value for our owners by enhancing our
portfolio and our operations, leading the future of personal
mobility and driving strong performance. In contrast, the proposed
structure creates an unacceptable level of risk for our company and
its shareholders," concluded Barra.
The Board's conclusions are summarized below and in an investor
presentation available at
http://media.gm.com/content/dam/Media/gmcom/investor/2017/mar/GM-chart-set.pdf
- As Greenlight has already acknowledged, the proposed dual-class
common stock structure would have no positive effect on GM's
underlying business or cash flows, and therefore would not create
additional intrinsic value. The proposed dividend security would
not help GM sell more cars, drive higher profitability, or generate
greater cash flow — nor would it address the fundamental sector
factors affecting GM's stock price.
- GM believes that implementation of the proposed dual-class
structure would lead to a loss of the company's investment grade
credit rating.
- A non-investment grade rating would have an approximately
$1 billion EBT impact on GM
Financial, put $1 billion of profit
at risk for the automotive company and necessitate approximately an
additional $5-$10 billion of cash on
the GM balance sheet.
- It would also limit GM's financial flexibility and adversely
affect the company's risk profile, including GM's ability to
execute its captive finance strategy, access capital markets
efficiently and execute revolver renewals.
Elimination of the dividend on GM's existing common stock would
likely lead to selling pressure by a significant universe of
institutional owners and cause concern and confusion among retail
holders, resulting in downward pressure on its share price;
Distribution of a large volume of an unprecedented security that
has no established market depth or liquidity would likely also lead
to selling pressure on the proposed "dividend security," resulting
in likely depressed pricing for the new security; and
The proposed structure could create complex governance
challenges, requiring the Board and management to consider and
respond to divergent expectations and interests of owners of two
distinct classes of stock in GM's strategic and capital allocation
decision making.
GM Recommends Electing Its Strong Slate of Directors
Together with Greenlight's dual-class common stock proposal, the
company also received notice of Greenlight's intent to nominate a
slate of four candidates for election to GM's Board. GM has a
highly experienced Board with relevant expertise and capabilities
in key areas that align with the company's strategic direction.
After evaluating Greenlight's nominees, including the connection
between Greenlight's nominations and its dual-class stock proposal,
the Board, on the recommendation of its Governance and Corporate
Responsibility Committee, has unanimously determined not to
recommend any of Greenlight's nominees for election to the Board.
The Committee's and Board's assessment of the nominees' skills and
qualifications followed the process and took into account the
considerations described in the "Director Nomination Process"
section of the Company's most recent proxy statement.
Additional Information
Overview of Recent Strategic Actions and Results
- Opel/Vauxhall Transaction to Improve Financial Metrics,
Allow Greater Share Repurchases – As another major step in its
ongoing work to deploy resources to higher-margin, higher-return
opportunities, earlier this month, GM announced an agreement to
sell GM's Opel/Vauxhall subsidiary and GM Financial's European
operations to PSA Group. Upon closing, the transaction is expected
to immediately improve GM's EBIT-adjusted, its EBIT-adjusted
margins and its adjusted automotive free cash flow, thereby
reducing the cash balance requirement under GM's disciplined
capital allocation framework by $2
billion. The company intends to use these funds to
accelerate share repurchases, subject to market conditions,
increasing its total 2017 cash returns to shareholders to
approximately $7 billion, comprising
approximately $2 billion of dividends
and approximately $5 billion of share
repurchases.
- Strong 2017 Outlook – Earlier this year, prior to the
Opel/Vauxhall announcement, GM announced that it expects to deliver
full-year 2017 EPS-diluted and EPS-diluted-adjusted of $6.00-$6.50; maintain or improve EBIT-adjusted
and EBIT-adjusted margins; and generate higher revenues, compared
to 2016. GM also indicated that it expects to generate about
$15 billion in automotive operating
cash flow and about $6 billion in
adjusted automotive free cash flow.
- Approximately $25 billion in
cash to shareholders – Based on this strong outlook, the GM
Board approved an additional $5
billion in common stock repurchases under the company's
existing share repurchase program. The new authorization brings the
total share repurchase program to $14
billion since it was announced in March 2015. This increase in stock repurchases
serves as further evidence of GM's commitment to driving
shareholder value through strong cash returns to its owners enabled
by strong business results. GM expects to return approximately
$7 billion in cash to shareholders in
2017, bringing total cash returns to shareholders to approximately
$25 billion since 2012. This
represents approximately half its current market capitalization and
more than 90% of its adjusted automotive free cash flow over the
same period.
General Motors Co. (NYSE: GM, TSX: GMM) and its partners
produce vehicles in 30 countries, and the company has leadership
positions in the world's largest and fastest-growing automotive
markets. GM, its subsidiaries and joint venture entities sell
vehicles under the Chevrolet, Cadillac, Baojun, Buick, GMC, Holden,
Jiefang, Opel, Vauxhall and Wuling brands. More information on the
company and its subsidiaries, including OnStar, a global leader in
vehicle safety, security and information services, can be found at
http://www.gm.com.
Forward Looking Statements:
In this press release and
in reports we subsequently file and have previously filed with the
U.S. Securities and Exchange Commission (the "SEC") on Forms 10-K
and 10-Q and file or furnish on Form 8-K, and in related comments
by our management, we use words like "anticipate," "appears,"
"approximately," "believe," "continue," "could," "designed,"
"effect," "estimate," "evaluate," "expect," "forecast," "goal,"
"initiative," "intend," "may," "objective," "outlook," "plan,"
"potential," "priorities," "project," "pursue," "seek," "should,"
"target," "when," "will," "would," or the negative of any of those
words or similar expressions to identify forward-looking statements
that represent our current judgment about possible future events.
In making these statements we rely on assumptions and analyses
based on our experience and perception of historical trends,
current conditions and expected future developments as well as
other factors we consider appropriate under the circumstances. We
believe these judgments are reasonable, but these statements are
not guarantees of any events or financial results, and our actual
results may differ materially due to a variety of important
factors, both positive and negative. These factors, which may be
revised or supplemented in subsequent reports on SEC Forms 10-Q and
8-K, include among others the following: (1) our ability to deliver
new products, services and customer experiences in response to new
participants in the automotive industry; (2) our ability to fund
and introduce new and improved vehicle models that are able to
attract a sufficient number of consumers; (3) the success of our
full-size pick-up trucks and SUVs, which may be affected by
increases in the price of oil; (4) global automobile market sales
volume, which can be volatile; (5) aggressive competition in
China; (6) the international scale
and footprint of our operations which exposes us to a variety of
domestic and foreign political, economic and regulatory risks,
including the risk of changes in existing, the adoption of new, or
the introduction of novel interpretations of, laws regulations,
policies or other activities of governments, agencies and similar
organizations particularly laws, regulations and policies relating
to free trade agreements, vehicle safety including recalls, and,
including such actions that may affect the production, licensing,
distribution or sale of our products, the cost thereof or
applicable tax rates; (7) our joint ventures, which we cannot
operate solely for our benefit and over which we may have limited
control; (8) our ability to comply with extensive laws and
regulations applicable to our industry, including those regarding
fuel economy and emissions; (9) costs and risks associated with
litigation and government investigations including the potential
imposition of damages, substantial fines, civil lawsuits and
criminal penalties, interruptions of business, modification of
business practices, equitable remedies and other sanctions against
us in connection with various legal proceedings and investigations
relating to our various recalls; (10) our ability to comply with
the terms of the DPA; (11) our ability to maintain quality control
over our vehicles and avoid material vehicle recalls and the cost
and effect on our reputation and products; (12) the ability of our
suppliers to deliver parts, systems and components without
disruption and at such times to allow us to meet production
schedules; (13) our dependence on our manufacturing facilities
around the world; (14) our highly competitive industry, which is
characterized by excess manufacturing capacity and the use of
incentives and the introduction of new and improved vehicle models
by our competitors; (15) our ability to realize production
efficiencies and to achieve reductions in costs as we implement
operating effectiveness initiatives throughout our automotive
operations; (16) our ability to successfully restructure our
operations in various countries; (17) our ability to manage risks
related to security breaches and other disruptions to our vehicles,
information technology networks and systems; (18) our continued
ability to develop captive financing capability through GM
Financial; (19) significant increases in our pension expense or
projected pension contributions resulting from changes in the value
of plan assets, the discount rate applied to value the pension
liabilities or mortality or other assumption changes; (20)
significant changes in economic, political, regulatory environment,
market conditions, foreign currency exchange rates or political
stability in the countries in which we operate, particularly
China, with the effect of
competition from new market entrants and in the United Kingdom with passage of a referendum to
discontinue membership in the European Union; and (21) risks and
uncertainties associated with the consummation of the sale of
Opel/Vauxhaull to the PSA Group, including satisfaction of the
closing conditions.
We caution readers not to place undue reliance on
forward-looking statements. We undertake no obligation to update
publicly or otherwise revise any forward-looking statements,
whether as a result of new information, future events or other
factors that affect the subject of these statements, except where
we are expressly required to do so by law.
Important Additional Information Regarding Proxy
Solicitation:
General Motors Company ("GM") intends to file
a proxy statement and associated white proxy card with the U.S.
Securities and Exchange Commission (the "SEC") in connection with
the solicitation of proxies for GM's 2017 Annual Meeting (the
"Proxy Statement"). GM, its directors and certain of its executive
officers will be participants in the solicitation of proxies from
shareholders in respect of the 2017 Annual Meeting. Information
regarding the names of GM's directors and executive officers and
their respective interests in GM by security holdings or otherwise
is set forth in GM's Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, filed with
the SEC on February 7, 2017, GM's
proxy statement for the 2016 Annual Meeting of Shareholders, filed
with the SEC on April 22, 2016 and
GM's Form 8-K filed with the SEC on December
19, 2016. To the extent holdings of such participants in
GM's securities are not reported, or have changed since the amounts
described, in the 2016 proxy statement, such changes have been
reflected on Initial Statements of Beneficial Ownership on Form 3
or Statements of Change in Ownership on Form 4 filed with the SEC.
Details concerning the nominees of GM's Board of Directors for
election at the 2017 Annual Meeting will be included in the Proxy
Statement. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND
SHAREHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH OR FURNISHED TO THE SEC, INCLUDING THE
COMPANY'S DEFINITIVE PROXY STATEMENT AND ANY SUPPLEMENTS THERETO,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and
shareholders will be able to obtain a copy of the definitive Proxy
Statement and other relevant documents filed by GM free of charge
from the SEC's website, www.sec.gov. GM's shareholders will also be
able to obtain, without charge, a copy of the definitive Proxy
Statement and other relevant filed documents by directing a request
by mail to GM Stockholder Services at General Motors Company, Mail
Code 482-C25-A36, 300 Renaissance Center, P.O. Box 300,
Detroit, Michigan 48265-3000 or at
stockholder.services@gm.com or from the investor relations section
of GM's website, http://www.gm.com/investor.
Non-GAAP Measures:
See our Form 10-K and Form 10-Q
reports filed with the SEC for a description of certain non-GAAP
measures used by GM, including EBIT-adjusted, EPS-diluted adjusted,
ROIC-adjusted, and adjusted automotive free cash flow, along with a
description of various uses for such measures. Our
calculation of these non-GAAP measures are set forth within these
reports and may not be comparable to similarly titled measures of
other companies due to potential differences between companies in
the method of calculation. As a result, the use of these
non-GAAP measures has limitations and should not be considered
superior to, in isolation from, or as a substitute for, related
U.S. GAAP measures.
Guidance
Reconciliation:
|
|
|
|
|
Year
Ending
|
Dec. 31,
2017
|
Diluted Earnings
Per Common Share
|
|
$6.00-$6.50
|
Adjustments
|
|
-
|
Tax effect on
adjustments
|
|
-
|
EPS-diluted-adj.
|
|
$6.00-$6.50
|
|
|
|
($B except
where noted)
|
|
Year
Ending
|
Dec. 31,
2017
|
Automotive net
cash provided by operating activities
|
|
~15
|
Less: expected
capital expenditures
|
|
~(9)
|
Adj. automotive
free cash flow
|
|
~6
|
|
|
|
Does not consider the
potential future impact of adjustments or the effects of the
Opel/Vauxhall related transactions described in our Form 8-K dated
March 6, 2017.
Results may not sum due to rounding .
|
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SOURCE General Motors