Investors at General Motors Co. will focus on the possibility of stock buybacks or a dividend on common shares following a disclosure from the United States government that it aims to sell the rest of its stake in the carmaker by the end of 2013, analysts told Reuters. Analysts expect GM next year to purchase the rest of its Series A preferred stock held by the UAW healthcare trust and the Canadian government.
They also expect the carmaker to return cash to shareholders via a buyback and dividend. "The likely clean-up of the Treasury stake by year end moves capital allocation to the forefront for 2014," Barclays' analyst Brian Johnson said in a research note. The move by the US treasury to totally exit from GM by yearend has been expected by many Wall Street analysts, despite prior disclosure that it would divest all its stake in the carmaker by April 2014.
According to analysts, Treasury's GM exit will get rid of the stigma of being called "Government Motors" that executives said has hurt GM sales slightly. Likewise, the move will get rid of the compensation cap implemented following its bailout in 2009, allowing GM to pay market rates to retain and attract top talent. Boasting of around $37 billion in total auto liquidity, GM has enough cash to do whatever it wants, although its executives have been reiterating that the carmaker will prioritize its operations.
"The priorities for cash reinvestment haven't changed," GM Chief Financial Officer Dan Ammann said during the carmaker’s earnings conference call in October. He said the reinvestments will allow them to make sure that GM has “a winning product portfolio going forward." He noted that while buying back the rest of GM's preferred shares in 2014 remains in the plans and longer term, the carmaker’s priority is returning cash to shareholders.