Notable investor and Berkshire Hathaway chief Warren Buffett does not support the $8 billion stock buyback initiative being lobbied by former Obama auto taskforce advisor Harry Wilson. Stockholders will vote whether or not to conduct the repurchase program during GM’s next stockholder meeting in June.
“I think the idea of trying to do something now that gets a little pop in the stock should not be on her agenda or on the shareholders’ agenda,” said Buffett in reference to GM CEO Mary Barra during an interview on CNBC on Monday, just ahead of Berkshire Hathaway’s annual shareholders meeting in Omaha, Nebraska. Berkshire owned about 2.5 percent of GM stock at the end of 2014, according to filings with the Securities and Exchange Commission.
The $8 billion stock buy-back idea is being campaigned by Wilson and four hedge funds: Appaloosa Management, Hayman Capital, Taconic Capital and HG Vora Capital Management. The collective owns 34 million GM shares and also wants to get Wilson on GM’s board of directors, which could create quite the conflict before GM’s shareholders meeting in June.
According to an SEC filing, Wilson will be paid between 2 and 4 percent of the appreciation of his clients’ 34 million shares, which equates to between 680,000 and $1.36 million for every $1 increase in the price of GM shares.
“I totally disagree with the idea of putting someone on the board who has an option on some other people’s stock,” said Buffett. “To have someone sitting there in the board room who has a two-year horizon … it’s just not the way to run a business.”
A letter from Wilson to CNBC attempted to clarify his arrangement with the four hedge funds. According to the letter, Wilson’s goal in seeking candidacy for a board seat is “”to help General Motors build for the long-term strengths that it needs to become a world-class company and to thrive for many years to come.”
During his interview on CNBC Monday, Buffett also stated that he supports GM CEO Mary Barra. “I think she’s exactly the right person for the job. I’ve met her a couple times and she is very, very good.” In 2014, Buffett purchased a Cadillac XTS after Barra convinced him to trade up from his 2006 DTS.
Wilson also came out in support of Barra as CEO while noting that he has owned GM stock since 2011 and is willing to take all of his compensation from the hedge funds in the form of stock, and agree not to sell it or have it locked up for a prolonged period of time.
“This is not by any means a two-year deal,” wrote Wilson in his letter.