Sunday, April 23, 2006

Trading ban will continue, GM says

Sunday, April 23, 2006

Trading ban will continue, GM says

Since it is not issuing earnings forecasts, executives cannot buy or sell company stock.

David Shepardson / Detroit News Washington Bureau

The year-long ban on most senior General Motors Corp. executives buying or selling company stock will continue indefinitely and isn't likely to be lifted until the automaker starts providing earnings forecasts.

No senior GM executive with access to sensitive earnings information has traded company stock since April 19, 2005, when the company stopped providing earnings guidance amid uncertainty about GM's financial future.

GM told its executives and employees with access to such information that they were indefinitely barred from trading in company stock in a memo last May.

On Wednesday, GM's chief financial officer, Fritz Henderson, said the company has no immediate plans to start to provide earnings guidance.

GM wants to resolve its outstanding financial issues with its bankrupt former parts supplier, Delphi Corp., before offering Wall Street profit forecasts, he said.

GM spokeswoman Toni Simonetti said Friday that based on the company's history, the trading ban is likely to continue until the company again offers earnings guidance.

"Lawyers look at this all the time to assess trading restrictions and look at if and when there could be some relief," Simonetti said. "Many of us are still subject to the trading ban."

GM has taken steps to strictly limit the number of people who have access to earnings information. "We've said let's not share information with people who don't have a need to know," Simonetti said. That's allowed some people -- initially covered by the ban -- to again buy and sell GM stock.

Earnings information is more valuable when a company doesn't offer earnings guidance and often makes stocks more volatile. GM's stock jumped more than 10 percent on its upbeat earnings report Wednesday, its largest gain since May.

The caution comes as GM's accounting is under scrutiny on a number of fronts. Other firms that stopped giving guidance -- such as Ford Motor Co. -- haven't barred executives from trading.

GM disclosed that both a federal grand jury and the Securities and Exchange Commission have subpoenaed records related to transactions involving supplier credits and precious metals. GM is cooperating with the investigations, Simonetti said.

That followed the SEC's first subpoena to GM for accounting records last April, which was upgraded to an investigation in October.

GM insiders have seen their stock portfolios drop considerably since the ban was imposed, as the stock has since dropped 31 percent. CEO Richard Wagoner bought 50,000 shares for $1.48 million in March 2005 -- and they're now worth $1.09 million.

When the highest-level executives trade a company's stock, the transaction must be reported to the SEC, but it is illegal for any insider to trade based on information not available to other investors.

The ban on stock trading applies to employee 401(k) saving programs. Employees can continue to buy company stock in those plans but must do so at the same rate as before the ban.

You can reach David Shepardson at (202) 662 - 8735 or


Post a Comment

<< Home