Tune up

GM's new backseat driver deserves cautious welcome

Harry Wilson, a 43-year-old financial whizz who helped steer the carmaker through its 2009 bankruptcy, wants GM to give him a board seat and hand more of its cash pile back to shareholders. That would impose healthy capital discipline on Chief Executive Mary Barra and her team, but the $8-billion buyback target looks aggressive.

Wilson has at least three things going for him: financial backing, knowledge and experience. He's working with hedge funds that own 2.1 per cent of GM's stock in total. And his stint with the US Treasury group that restructured the carmaker means he understands the company. He also serves on the board of auto-parts supplier Visteon, and he was hedge fund manager Dan Loeb's pick for board seats at Yahoo! and Sotheby's.

GM offers him a ripe target. Its auto business boasted over $25 billion of cash and marketable securities on its balance sheet as of December 31 - and just $9 billion of debt. GM is on the hook for $30 billion of pension and related liabilities, but low interest rates have tended to inflate that amount and the actual outlay should be minimal over the next few years. If the company wanted to keep, say, $15 billion of extra cash as insurance against another 2009-style meltdown, it could still buy back $8 billion worth of shares and have dough to spare.

Barra may have good reason to pursue a more conservative course. For one thing, GM hasn't yet settled the full tab for last year's ignition-switch recall fiasco. And with driverless cars exposing the auto industry to potential disruption over the next decade, it makes sense to build a war chest while sales are strong.

Handing back $8 billion in one chunk would also put GM at the low end of liquidity targets it outlined for shareholders, according to Barclays. A reasonable compromise might be to pay an equivalent amount from cash earned over, say, two to three years. Either way, it's a good bet that Wilson will be keeping top management on its toes.