Question of the Day: Is $20 Billion Too Much for GM to Spend?
As our own Matt Posky pointed out earlier today, automakers certainly seem to put shareholders ahead of consumers with far too many decisions — is General Motors the latest?
As part of its third quarter earnings announcement Monday, the Detroit-based auto company revealed plans for a $20 billion multiyear share repurchase program. The move comes after GM completed a $6 billion share repurchase program in January, plus it repurchased $5.3 billion of its own shares and an additional $1 billion in October, the company noted.
So it begs the question: Why?
"We believe the company's undervalued. We think this is the best way to bring value to our shareholders," Barra said on a call with investors on Oct. 20. "It reflects our board's commitment to return cash to shareholders because the shares are undervalued."
Dan Ives, partner and senior managing director at New York-based investment banking firm Yorkville Ives, told the Detroit Free Press that he considers the share buyback strategy a sensible one while the stock remains cheap.
Barra and GM are taking a page out of the Apple playbook on buybacks and it makes a ton of sense in our view. The stock is cheap and not being valued fairly by investors," he said. "Bulls (investors) like to see the confidence."
GM trades in the $77 range while Toyota trades around $196 a share. Is GM as valuable to you as Toyota or is this a waste of $20 billion? Let us know.
[Images: General Motors]
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Michael Strong has spent more than 25 years writing about the automotive industry. A Detroit-area native, he’s written about everything from local car shows to product reviews to financial news. Currently he writes and edits for a variety of national and local publications. He’s also a longtime member of the Automotive Press Association and the International Motor Press Association, and a graduate of Georgia Southern University. Hail Southern! Despite a love for ’70s land yachts and BMWs from the late ’80s and early ’90s, his personal vehicle is neither of those.
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I don't know the answer, but $20 billion will also be spent on the 6.2 V8 recall, after replacing a million engines and settling lawsuits.
Been saying this for years... years. Scumbag stockholders are worse than nazis and dahmer ..
It's a publicly traded company. They do stuff like this. Not much to see here.