The manager of General Motors Corp.’s employee stock fund sold all shares of GM stock on fears the company could be forced to file for bankruptcy in the coming weeks, the automaker said Friday.
As of Dec. 31, nearly 30,000 GM employees and other plan participants held about 75 million GM shares –12.5 percent of the Detroit automaker — in their 401(k) plans. GM spokeswoman Julie Gibson said the total number of shares had not significantly changed since then.
GM suspended new stock purchases by employees last year because the company had run out of shares to sell.
Employee shares were sold over the last 25 days at an average selling price of $1.87, Gibson said.
The sale is substantially complete. State Street Bank and Trust, the independent manager of the GM Stock Fund, started selling shares on March 31 — the day after the Obama administration’s auto task force rejected GM’s viability plan and warned the “best option” for the automaker’s turnaround could be bankruptcy. GM is operating on $15.4 billion in federal loans.
State Street said the sale had been prompted “due to the economic climate and the circumstances surrounding GM’s business,” according to a one-page memo to GM employees that was included in a filing late Friday by the automaker with the Securities and Exchange Commission.
State Street found that one aspect had been met of its two-part test for deciding whether to divest investments in GM stock, but did not indicate which applied. The two parts are whether there was a serious question concerning GM’s “short-term viability as a going concern without resorting to bankruptcy proceedings” and “no possibility in the short-term of recouping any substantial proceeds from the sale of stock in bankruptcy.”
Gibson declined to comment on State Street’s decision.
State Street invested the proceeds in short-term fixed income and money market instruments. On May 29, the fund will be disbanded and participants who don’t choose a new option will see their funds invested in a default investment fund.
State Street’s sale prompted the involuntary sale on Friday of shares held by GM executives, according to a filing with the SEC.
The sell-off involved more than 38,000 shares held in trust by senior executives, including President and Chief Executive Officer Fritz Henderson. The investment manager dumped 6,629 shares held by Henderson, the second highest number behind Gary Cowger, vice president of global manufacturing and labor relations, who owned 17,610 shares.
Other executives whose shares were sold include: Chief Financial Officer Ray Young, 1,047 shares; former product czar Bob Lutz, 1,507 shares; Treasurer Walter Borst, 581 shares; and Maureen Kempston Darkes, vice president and president, GM Latin America, Africa and Middle East, 2011 shares.