More than 5% of General Motors Co.’s shares were acquired by Capital Research Global Investors, one of the largest investment management companies in the world, the automaker announced last Tuesday. GM revealed in a filing submitted to the Securities and Exchange Commission that the Los Angeles-based company currently owns over 92 million shares or 5.8% of the company.
The SEC requires that when the ownership of an individual or organization exceeds 5%, the corporation has to inform the agency. Capital Research Global Investors is part of the Capital Group Companies, one of the top mutual fund managers.
According to analysts, this decision to increase holdings in GM implies a vote of confidence in GM. David Kudla, CEO of Mainstay Capital Management LLC, said that the company is now “lean and mean,” adding that the balance sheet is “very different” from what it was about three or four years before.
Kudla said that its stock is lower by 45% from last year and since it “certainly” didn’t lose its enterprise value, it makes these acquisitions likely to come through. He explained that GM will only become stronger despite worries about the difficulties faced by its European operations. He said, ”Europe is struggling, so everybody who does business there is struggling.”
However, Chevrolet’s market share in the U.S. had grown last year and the current market is continuing to recover. He said that there’s a deep recession and that recovery is slow but there’s a lot of pent-up demand. Kudla anticipates that GM will post a profit of around $8 billion for 2011 when it reveals its earnings on Thursday.
GM has yet to comment about the stock news. Capital Group also hasn’t said anything but then it does have a policy of not talking about its investments. GM became bankrupt in 2009 and the U.S. government still owns a part of it. Specifically, about 26% of GM is owned by the U.S. Treasury Department.