CEO says GM has repaid government loans in full

[JBeukema]

It's true that GM has squared up on its government loans, but Whitacre isn't telling the full story here.

With GM in deep trouble and hundreds of thousands of jobs in the balance, the Obama administration -- through the Troubled Asset Relief Program (TARP) -- stepped forward with tens of billions of dollars worth of assistance. As of March 31, 2010, the U.S. Treasury had committed approximately $52.4 billion to GM.

Only a fraction of that, $6.7 billion, was in the form of loans, however. Most of the government's GM investment was converted to an ownership stake in the New GM, the company that emerged from bankruptcy: $2.1 billion in preferred stock; and 60.8 percent of the company's common equity.

GM had already made several installments in paying back the $6.7 billion loan. But on April 21, 2010, GM announced that it had paid back the entirety of the remaining $4.7 billion in loans from the U.S. government (and another $1.1 million to the Canadian government). GM had until 2015 to pay back those loans.

So the loan portion of the GM bailout was, in fact, settled, with interest, five years ahead of schedule.

But the U.S. government is still on the hook for the bulk of its investment in GM. Again, the U.S. Treasury owns $2.1 billion in preferred stock and a 60.8 percent stake in the company

....

On March 18, 2010, the government's nonpartisan Congressional Budget Office projected the government will end up losing $34 billion in TARP funds extended to the automotive industry. The CBO didn't break out how much of that is tied to GM, but it's fair to say most of it.

PolitiFact | CEO says GM has repaid government loans in full

 

[CrusaderFrank]

If this whole "running an auto company" thingy doesn't work out, he could work for Goldman Sachs

 

[Neubarth]

If this whole "running an auto company" thingy doesn't work out, he could work for Goldman Sachs

When you pay the US Government back the money they loaned to you with money they gave to you for potentially worthless stock, have you actually paid back the loan, or is it still a loan hidden behind a guise?

 

[boedicca]

It's like paying off a credit card with cash advances from another credit card.

 

[hjmick]

But wait! There's more!

...

As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.

GM claims that the fact that it is even using the escrow money to pay back the loan instead of using it all to shore itself up shows that it is on the road to recovery. That actually would be a positive development--although hardly one worth hyping in ads and columns--if it were not for a further plot twist.

Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government's tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new--and bigger--DOE loan much more feasible.

In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM's government debt--not pay it back!

GM boasts that, because it is doing so well, it is paying the $6.7 billion five years ahead of schedule since it was not due until 2015. So will there be an accelerated payback of the rest of the $49.6 billion investment? No. That goal has been pushed back, as it turns out...

Still Government Motors - Forbes.com

Payback fail...

 

[Vast LWC]

If this whole "running an auto company" thingy doesn't work out, he could work for Goldman Sachs

When you pay the US Government back the money they loaned to you with money they gave to you for potentially worthless stock, have you actually paid back the loan, or is it still a loan hidden behind a guise?

The stock is obviously not "potentially worthless", when GM sales are making a rebound, and GM has cut costs to the point where they did not need to use the money's invested in buying their stock to use in costs other than paying back the loan.

The point is that the American taxpayer now has no money invested that GM can just default on at some point through bankruptcy.

The American taxpayer now simply owns a good portion of GM, until private investors choose to buy them out again at some point in the future.

So, in fact, the taxpayer stands to make a profit in the end, like they did with the banks (Sans Fannie, Freddie and AIG of course, at least so far.).

 

[Big Black Dog]

CEO says GM has repaid government loans in full

I believe him. I just recently bought a 2010 Chevy Avalanche LTZ and it cost me $53,900. I got a little off for paying cash but not much. I figure I helped them repay the loan...

 

[Oddball]

So, in fact, the taxpayer stands to make a profit in the end, like they did with the banks (Sans Fannie, Freddie and AIG of course, at least so far.).

So, when is my dividend check going to show up in the mail?

 

[boedicca]

The recent ads by GM touting this repayment are highly misleading - and could be interpreted as fraudulent. GM is a public company. Official communications from the company which mislead investors are a violation of SEC regs.

The timing of the ads are highly suspicious. It's very plausible that GM was pressured by its largest shareholder (the U.S. government) to run these ads while financial reform is being debated. An investigation is in order.