The fight between General Motors and a group of activist investors led by former Auto Task Force advisor Harry J. Wilson is over after a compromise. The automaker is announcing a $5 billion stock buy-back between now and 2016, and Wilson agrees to withdraw his planned bid for election to the automaker's board of directors. Prior to this announcement, GM reportedly held $25 billion in cash.

GM is also divulging more plans about its financial future. The company is planning a more aggressive vehicle launch rate in the coming years, including investing $9 billion of capital into that growth. The automaker also wants to maintain a cash balance of $20 billion in the future. In addition to this buy-back, any available free cash flow will also be returned to shareholders beginning in January 2016.

"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," Wilson said in GM's release.

Wilson first mounted his election to the GM board in early February and was being backed by four hedge funds that held about 2 percent of the automaker's stock. The original request was for an $8 billion stock buy-back. According to The Wall Street Journal, the funds supporting Wilson were reportedly going to pay him two percent to four percent of the profit on their shares in the automaker in the next three years in exchange for his role.


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GM Announces Disciplined Capital Allocation Framework

Improving business performance and strong capital discipline enable increased returns to shareholders

2015-03-09

Reinvesting in the business to drive 20 Percent or higher ROIC
Targets cash balance of $20 billion, while maintaining investment-grade balance sheet
Plans to return all available free cash flow to shareholders
Authorizes initial $5 billion share repurchase program beginning immediately; reaffirms strong and growing dividend policy
DETROIT – General Motors Co. (NYSE: GM) today announced a comprehensive capital allocation framework, as improving business performance and strong capital discipline enable increased returns to shareholders. GM said a foundational element of its approach will be to return all available free cash flow to shareholders while it maintains an investment-grade balance sheet underpinned by a target cash balance of $20 billion.

GM also announced that its Board of Directors authorized the initial repurchase of $5 billion in GM shares to begin immediately and conclude before the end of 2016. GM in February announced its intent to increase its quarterly stock dividend to $0.36 per share effective in the second quarter of 2015 as part of the Board's regularly scheduled second quarter 2015 dividend declaration process, which would result in an expected dividend payout of approximately $5 billion through year-end 2016.

"As we continue to execute on our plan to become the most valued automotive company, our track record of improved operating performance, strong earnings momentum, and disciplined capital investments provide the foundation for a comprehensive capital allocation framework," said GM CEO Mary Barra. "We will continue to invest in innovative technologies and world-class vehicles that will deliver sustained profitable growth and maximize returns to shareholders."

GM's capital allocation framework encompasses three core principles:

High-Return Investment in the Business – GM previously stated it expects capital expenditures in 2015 of $9 billion to invest in future growth, including a more aggressive vehicle launch cadence in the coming years. GM will reinvest in its business with the objective of driving 20 percent or higher return on invested capital (ROIC) through investments in world-class vehicles and leading technology. The company plans to disclose its ROIC performance each quarter beginning with its first quarter 2015 report. The company expects this disciplined capital deployment will strengthen and grow GM's brands and drive improved financial performance and will result in capital spending in the range of 5–5.5 percent of its annual revenue in the future.
Maintain an Investment-Grade Balance Sheet – GM intends to maintain an investment-grade balance sheet, including a target cash balance of $20 billion. GM believes maintaining an investment-grade balance sheet is critical to support long-term growth and increased earnings at GM Financial, which is a catalyst for improved automotive sales and profitability.
Return Capital to Shareholders – Beyond reinvesting in the business and maintaining an investment grade balance sheet, the company expects to return all available free cash flow to shareholders. Starting in January 2016, GM will develop its annual capital return plans and communicate them to the market during the first quarter of each year.
In 2014, the company established an executive compensation program that aligns management incentives with ROIC and total shareholder return. GM said it is committed to providing greater clarity around its compensation program and will continue to evaluate the program to ensure that strong linkage.

GM reaffirmed that in 2015 it expects its total earnings before interest and tax (EBIT) adjusted and EBIT-adjusted margin to increase, compared to 2014, after adjusting 2014 for the impact of recall costs. The company reiterated that it is on track to meet its 2016 financial targets to achieve EBIT-adjusted margins in North America of 10 percent; to return to profitability in Europe; and to maintain strong margins in China. It also reaffirmed its long-term strategic plan to achieve 9–10 percent EBIT-adjusted margins by early next decade.

Investor Conference Call Information

A conference call for investors and securities analysts to discuss the announcement is scheduled for today, March 9, 2015, at 8:30 a.m. EDT.

This press release and supporting material are being posted to GM's Investor Relations website, http://investor.gm.com, and its media website, http://media.gm.com, approximately one hour prior to the call.

To access the conference call, dial 800-830-3805 (or +1-416-641-6283 for international access) 10 minutes prior to the start time and ask to be connected to the General Motors conference call. To access a taped replay of the conference call, available from 11 a.m. EDT, March 9, 2015 until 11 a.m. EDT, March 16, 2015, dial 800-633-8284 (or +1-402-977-9140 for international access) and enter reservation number 21763442 to access the replay.

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

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GM and Investment Group Announce Agreement

2015-03-09

DETROIT – General Motors Co. (NYSE: GM) and an investment group led by Harry Wilson jointly announced that, in conjunction with GM's disciplined capital allocation framework announced today, Wilson has agreed to withdraw his nomination to stand for election to the Board of Directors at the company's 2015 annual meeting and to withdraw his shareholder proposal.

GM CEO Mary Barra said: "GM is moving ahead with its comprehensive capital allocation framework, and constructive dialogue with our shareholders has helped ensure that we are addressing these key initiatives with the appropriate level of clarity and transparency. We will continue to be engaged with all of our shareholders and to be responsible stewards of our owners' capital."

Wilson said: "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. We thank Mary Barra, senior management and the Board for their engagement and focus on these important issues and for working toward a mutually successful outcome."

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

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