GM <GM> BUYBACK SEEN CALMING SHAREHOLDERS
Wall Street analysts said a share
repurchase program announced by General Motors Corp is in part
an attempt to placate shareholders angry over the recent
repurchase of shares from Texan H. Ross Perot last year.
    "He (Perot) was obviously the big trigger" said analyst
Joseph Phillippi of E.F. Hutton Co. "There was a firestorm of
criticism from people on the institutional side."
    Wall Street analysts said the GM buyback will boost the
shares in the near term but some had reservations about the
long term effects of the plan.
    "They're trying to soothe irate shareholders irriated by
the buyout of Ross Perot," said analyst David Healy of Drexel
Burnham Lambert Inc.
    Healy said General Motors chairman Roger Smith had been
hinting at a buyback program in meetings with institutional
investors. He said the plan, which could cost more than five
billion dlrs over four years, was similar in size to Ford Motor
Co's <F> repurchase program but smaller on a percentage basis
than that of Chrysler Corp <C>.
    Healy said General Motors will have to borrow money to buy
back stock on a large scale.
    The General Motors plan, announced after a board of
directors meeting in New York, calls for repurchase of up to 20
pct of the common stock by the end of 1990.
    The GM board also authorized repurchase of up to five mln
class E <GME> and class H <GMH> shares. GM shares closed at
75-5/8, up 7/8, in composite trading prior to the company's
announcement. However subsequently Jefferies and Co, which
trades NYSE-listed issues outside regular hours, said it was
making a market in the shares at 77-1/2 to 78.
    "The stock is obviously going to be strong tomorrow," said
Ronald Glantz, analyst at Montgomery Securities.
    "I don't know where the money (for the buyback) is coming
from unless they borrow," Glantz said. "Their credit rating is
going to fall." GM said it anticipates a decrease in automotive
capital spending.
    Glantz believes GM could be inviting a strike this fall by
going ahead with the buyback program at a time when it has
37,000 employees on indefinite layoff and 11 plants marked for
closing. After deciding against a profit sharing bonus for
workers and buying out Perot for 743 mln dlrs "this will be
seen as rubbing salt into the wound," Glantz said. "GM must be
challenging the union to make it the strike target."
    Glantz said he is not changing his buy recommendation on GM
and expects the shares to rise. But he said he did not think
the overall plan was "prudent."
    "Obviously we're going to get at least an opening gap in
the stock tomorrow," Hutton's Phillippi said.
    He says GM apparently believes as a result of a cost
reduction program plus the falloff in capital spending levels
"they can handle a stock buyback of this magnitude within the
confines of their cash flow." Phillippi, who has been telling
clients to hold GM shares mainly for income, said on balance
"we've got to feel they're doing something constructive."
 Reuter
