Lutz spends $1.1 million to raise GM holdings by 20%

By exercising stock options, General Motors Corp. Vice Chairman Bob Lutz spent $1.1 million today to buy almost $1.7 million worth of GM stock and increase his holding of company shares by 20%, the company reported this morning.

A stock option is a financial instrument that lets its holder buy shares at set price, and they have significant value when that price is less than the stock’s current price.

Lutz exercised options issued last year, allowing him to acquire 53,336 shares for $20.90 each, for a total of $1.1 million. The shares are worth a total of $1.68 million, based on a share price of $31.50.

Lutz also sold 5,502 of the shares at $31.50, or $173,313, according to a filing with the U.S. Securities and Exchange Commission.

GM Spokeswoman Julie Gibson said the sale was to cover Lutz’ tax liability generated by the stock purchases.

“The company is obviously encouraged by Bob Lutz’s purchase of stock,” Gibson said. “We think it shows confidence in our turnaround.”

The transactions increased Lutz’ holdings by a total of 47,834 shares to about 281,000 shares of GM stock. The purchased stock was part of a 2006 stock option grant that became exercisable in February.

GM shares were one of the biggest gainers among large-company stocks last year. On Thursday morning, the shares slipped 15 cents, or 0.5%, to $31.58.