Former UAW VPsJoe Ashton resigned from the GM's Board after investigators questioned him about the FCA/UAW training funds scam.
General Motors Co. announced the United Auto Workers Retiree Medical Benefits Trust, aka the VEBA Trust, intends sell 40 million shares, or about 29% of the trust, of GM common stock in an underwritten secondary offering.
The VEBA will receive all of the proceeds from this offering, which could raise as much as $1.6 billion. No shares are being sold by GM; however, the automaker plans to buy $100 million worth of the available shares. With a stock price hovering just above $40 a share that equates to about 2.5 million shares.
But the sale, which is covered by rules set down following GM’s 2009 bankruptcy, could end the union’s presence on the company’s board of directors. The union must retain 50% of the shares it received as part of the bankruptcy plan.
If it sells all the shares, which have split three-for-one, it will end up at 38% of the original shares it received. After the sudden resignation of Joe Ashton, a retired UAW vice president, who had held the union’s board seat since 2013, UAW president Dennis Williams said the union intended to retain a grip on the seat.
However, the rise in the value of GM’s stock has prompted the professional money managers who make the trust’s investment decisions to sell GM’s share of the trust to diversify the investment portfolio.
UAW President Dennis Williams said the union hoped to retain the seat on the board after Ashton resigned.
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The sale would very likely reduce the size of the trust’s stake in GM and leave the trust – and by extension the union – without enough shares to command a seat on the board under the terms of the original bailout.
Ashton resigned from his seat on the board because he was questioned by investigators in conjunction with the scandal involving the improper spending of training funds controlled jointly by the company and the union that has led to federal indictments of officials from the UAW and Fiat Chrysler Automobiles.
Critics have contended for years that the union got the big stake in GM because the Obama administration gave the UAW preference over other creditors. However, the form of the bailout was essentially approved by the U.S. Supreme Court.
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In connection with the VEBA Trust’s acquisition in 2009 of the shares of GM common stock subject to this offering, the U.S. Department of Labor required the VEBA Trust to appoint an independent fiduciary to make all decisions with respect to the disposition of such shares.
Brock Fiduciary Services LLC is the independent fiduciary and investment manager to the VEBA Trust for these shares.
Citigroup and Barclays are acting as underwriters for the offering. The underwriters may offer the shares of common stock, excluding the shares to be repurchased by GM, from time to time in one or more transactions on the NYSE, on the over-the-counter market, through negotiated transactions or otherwise, at market prices, at prices related to market prices or at negotiated prices.
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Timing of the sale has not been set yet.
Michael Strong contributed to this report.