GM plans $5B stock buyback and averts showdown with hedge funds

DETROIT (AP) — General Motors announced a $5 billion stock buyback as part of a plan to return more cash to investors. In return, an activist shareholder decided to drop a potentially divisive bid for a seat on the company's board.

The moves, announced today, are part of a deal with Harry Wilson, a former member of the government task force that restructured GM coming out of its 2009 bankruptcy.

Wilson, who represents four hedge funds which own about 2 percent of the company, had previously accused GM of hoarding cash to the detriment of shareholders and had sought an $8 billion buyback and a board seat.

But today he said he was impressed at how quickly GM's management responded, adding that the company agreed to just about everything the funds wanted.

"We basically said thank you," Wilson said.

GM had $25.2 billion in cash at the end of last year, part of what it called a "fortress balance sheet" designed to withstand another financial crisis. Going forward the automaker plans to maintain a cash balance of $20 billion and aims to keep its investment-grade credit rating.