GM shareholders reject stock split

DETROIT — General Motors shareholders have overwhelmingly turned down an activist shareholder’s plan to split the company’s stock into two classes.

Only about nine per cent of the stockholders voted for the plan by David Einhorn’s Greenlight Capital hedge fund in a preliminary vote count. They also re-elected all 11 GM board members, rejecting the three candidates backed by Greenlight.

Einhorn proposed splitting the stock into capital appreciation and dividend classes. He says the plan would unlock the stock’s value. GM shares have appreciated only about four per cent since the company returned to the public markets in November, 2010, after bankruptcy. During the same period, the Standard & Poor’s 500 index has more than doubled in value. The company has made $42 billion in the past seven years.

CEO Mary Barra says the company will stay on its current course even though the stock markets have yet to reward those efforts. She says the company’s strategy of cutting costs, shedding underperforming businesses and trying to lead in new technology will deliver long-term results.

“It gives me more resolve to make sure we work harder, work faster, and continue to put great cars, trucks and crossovers on the road,” she told reporters before the vote.

Barra also says the company is prepared to handle an automotive downturn, an effort to allay investor fears that the industry has reached the peak of its business cycle in the U.S., GM’s most lucrative market. U.S. sales so far this year are down two per cent and likely will decline from last year’s record of 17.5 million vehicles.

GM says it analyzed Greenlight’s proposal and determined it risky because it would pit one class of shareholders against the other and could put the company’s investment grade credit rating at risk.

In a statement, Einhorn said Greenlight was disappointed that shareholders chose to maintain the status quo. The fund, which owns 3.6 per cent of GM shares, said its three board candidates would have helped to fix GM’s “inefficient capital structure.” GM should consider adding Greenlight’s candidates to its board in the future, he said.

GM shares fell just under one per cent after Tuesday’s vote to $34.18. The Associated Press