GM plans to return available free cash to shareholders, maintain $20 billion cash balance

By Lisa Kerner

Charlotte, N.C., March 9 – General Motors Co. announced a comprehensive capital allocation framework under which it would return all available free cash flow to shareholders while maintaining an investment-grade balance sheet, “underpinned by a target cash balance of $20 billion,” said chief executive officer Mary Barra during a conference call on Monday.

GM’s goal is also to drive a return on invested capital of 20% or higher when it comes to putting money back into the business.

Executive vice president and chief financial officer Chuck Stevens said the $20 billion cash target was appropriate, as it includes about $8 billion to run the business, plus cash to maintain an investment-grade rating and a cushion for a recession.

Stevens said GM has no plans to draw on its revolver, as that is considered for emergencies such as a deep recession.

Also on Monday, the Detroit-based carmaker’s board approved a $5 billion share repurchase program to be completed by the end of 2016.

Barra also commented on the company’s executive compensation program, saying it was “highly aligned” with GM’s ownership.

The program, established in 2014, aligns management incentives with ROIC and total shareholder return, according to a news release. GM said it is committed to providing greater clarity around its compensation program.

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