General Motors Repays U.S and Canada Government Loans

by Alex Luft
Apr 21st, 2010

General Motors has just announced that it has repaid the balance of its government loans in full and ahead of schedule. During a visit to The General’s Kansas City assembly plant, GM CEO and Chairman Ed Whitacre announced that the automaker has made its final payment of $5.8 billion to the U.S. Treasury ($4.7 billion) and Export Development Canada ($C1.1 billion). Whitacre also announced that GM will invest $257 million in its Fairfax, Kansas and Detroit Hamtramck assembly centers.

GM originally had until 2015 to finish paying off the loans, but earlier this year, Mr. Whitacre said that it would finish paying them off by June. By paying off the loans today, GM has beaten all loan-related estimates and deadlines. It has also paid interest on the money. In December, GM made payments of $1 billion to the U.S. and $200 million to Canada.

The move will certainly build confidence in The General, an important feat given GM’s goals of becoming an independent public company again. However, these repayments do not affect the equity stakes held by the United States and Canadian governments in General Motors, as most of the $50 billion that GM borrowed from Washington as it headed into bankruptcy was converted to an equity stake. Currently, the U.S. Treasury owns 61 percent of GM while another 10 percent is held by Canada.

Most recently, GM CFO Chris Liddell expressed his belief that the New GM can earn an operating profit in 2010 after losing $4.3 billion in the second half of 2009. The 2009 loss was related to a UAW retiree medical plan settlement as well as a foreign currency re-measurement loss.

The GM Authority Take

The videos (available after the jump) should give you an idea of the levels of excitement at the New GM. But this is just the beginning, as we’ve not yet seen what the New GM is capable of doing. Too ambiguous? Let’s break it down.

The New GM hasn’t had nearly enough time to wake up and show us what it’s really capable of. If you think the Cruze, LaCrosse, Malibu, SRX, Equinox, Terrain and Camaro are selling well, we simply can’t wait for the next-generation CTS, Malibu, Aveo, and forthcoming ATS, and XTS.

Click past the break for the full press release and the aforementioned videos.

GM Pays Back Government Loans in Full, Announces Investment in Fairfax, Detroit Hamtramck

2010-04-21

GM pays back its loans from U.S. Treasury and Export Development Canada
Strong sales, confident outlook enable payback ahead of schedule
$257 million investment for Malibu at Fairfax, Kansas, and Detroit Hamtramck

KANSAS CITY, KANSAS – General Motors Company Chairman and CEO Ed Whitacre today announced that GM has made its final payment of $5.8 billion to the U.S. Treasury and Export Development Canada, paying back its government loans in full, ahead of schedule.

The announcement came at a ceremony here to highlight an investment of $257 million at GM’s Fairfax, Kansas, and Detroit Hamtramck assembly centers. The investment will prepare Fairfax to build the next generation of Chevrolet’s award-winning Malibu, and make Detroit Hamtramck a second source for Malibu, ensuring that Chevrolet can meet market demand for this popular mid-size sedan.

“GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse we build here in Fairfax,” said Whitacre. “We are now building some of the best cars, trucks, and crossovers we have ever built, and customers are taking note. Our dealers are increasing their sales, we are investing in our plants, and we are restoring and creating jobs.”

The U.S., Canadian, and Ontario governments, as part of the launch of the new GM, provided loans of $8.4 billion and took equity stakes in the new company. Today’s payment of $5.8 billion ($4.7 billion to the U.S. Treasury and $C1.1 billion to Export Development Canada) completes the payback of these loans.

“GM’s ability to pay back the loans ahead of schedule is a sign that our plan is working, and that we are on the right track. It is also an important first step toward allowing our stockholders to reduce their equity investments in GM,” said Whitacre. “We still have much hard work ahead of us, but we are making progress toward our vision of designing, building, and selling the world’s best vehicles.

“We appreciate the support the taxpayers have given GM, and our great new products are tangible results of that support.”

Strong sales support manufacturing, jobs

Strong sales of new Chevrolet, Buick, GMC, and Cadillac products are fueling a steady increase in production as GM works to meet growing customer demand.

Sales for GM’s four brands are up 36 percent through March versus the same period in 2009, and many newly introduced cars and crossovers – including Chevy Equinox, Camaro and Traverse; GMC Terrain and Acadia; Buick LaCrosse; and Cadillac SRX – remain in short supply at GM dealers.

The Fairfax plant currently builds two of GM’s strongest selling cars, the Chevy Malibu and Buick LaCrosse. For the first three months of this year, GM’s U.S. dealers delivered more than 49,000 Malibus and 14,000 LaCrosses, representing a 58 percent increase over the same period last year. In response to this strong demand, Fairfax in February added a third shift of approximately 1,050 jobs, bringing total employment at the plant to more than 3,800.

Fairfax will become the primary source for the next generation of the Malibu. Detroit Hamtramck, which builds the Buick Lucerne and Cadillac DTS, will be equipped to build the Malibu as well, ensuring that Chevrolet can meet market demand.

Detroit Hamtramck will also build the Chevy Volt electric vehicle with extended range, which launches this year. On March 31, the plant celebrated a major milestone, the building of the first pre-production Volt on the regular assembly line.

The Malibu-related investments of $136 million in Fairfax and $121 million in Detroit Hamtramck will include facilities, machinery and equipment, and tools.

Since the launch of the new GM last July, the company has announced investments of more than $1.5 billion at 20 facilities in the U.S. and Canada. These investments restored or created more than 7,500 jobs, and they demonstrate a strong commitment to GM’s future and to the United States and Canada.

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Click here to watch the videos that we mentioned in the GM Authority take.

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More about: Analysis, Bailout, Business, Decisions, Development, Ed Whitacre, Fairfax - Kansas - USA, Financial, Manufacturing Facilities, People, Repayment

5 ResponsesLeave a comment

Mike
April 23, 2010 at 7:47 pm
Reply

The ads GM is running saying they have repaid the loans are totally misleading. They are leading the public to believe they have repaid the loans from corporate earnings not using government TARP money.

Shame on you GM.
- Alex Luft
  April 23, 2010 at 7:56 pm
  Reply
  
  Well, technically they did repay the loans.
  
  What the source of funds for those repayments is a different story… The fact is that GM no longer has any debts on its books and now only needs to get an IPO out in order for the governments of the U.S. and Canada to divest their invested equity (and hopefully, earn a profit).
  
  In my humble opinion, what is currently being thrown in a negative light will eventually prove fortuitous for the U.S. and Canadian federal gov’ts.
Bryan
April 25, 2010 at 7:42 pm
Reply

So if I pay off my Visa card with my Master Card I can call Mike Ramsey’s show and yell, “I’m debt free!”

Repaid our government loans with a hidden government slush fund and then go out and brag about it. Shame on you GM. At this point I’d trust a guy selling used GM’s out of a temporary trailer more then their CEO in a TV ad.
- Alex Luft
  April 25, 2010 at 9:51 pm
  Reply
  
  No Bryan, that’s not how it works.
  
  First off, let’s get through the technicalities: in order to pay off your Visa with the MasterCard, you’d need to transfer the balance from one to the other and in doing so, will most likely incur a transfer fee from the card you’re transferring to. And once you’ve done that, you’d still be left with a debt.
  
  What GM did is pay off its US and Canadian debts using TARP funds. Therefore, GM’s balance sheet is now debt-free. The TARP infusion of nearly $50 billion is an equity stake owned by the US and Canadian governments. It’s not a loan.
  
  Therefore, when GM begins to turn a profit and begins to eat the lunch of such automakers as Toyota, Honda, and Nissan, then it will kick off its IPO, allowing the governments to divest their interest in GM. It’s purely a business move by the aforementioned gov’ts, plain and simple – just like buying stocks and/or investing in a start-up. There’s risk involved, but there’s also the possibility of a fat upside.
  
  Since we’re an independent GM fan website, we think there’ll be a huge upside to the governments’ efforts.
  
  If you’d rather trust a guy selling used GM’s out a temporary trailer more than your very own gov’t, well – that’s your personal choice (and freedom).
Maggie Mae
April 27, 2010 at 8:02 pm
Reply

One must remember where gov’t money comes from -most revenue is from individuals and businesses.
Government should not be providing any “slush fund” money to any business or individual unless they do it for everyone. GM has poorly managed their business and should get whatever consequences which arise from that – after all that is what happens to all the small business owners who lose money and go bankrupt when their customers go bankrupt or close. Will the federal government help these people out?
For those that think an IPO is going to change the world for GM it won’t. The reason they have to try to sell stock is because they are such a huge credit risk no bank in their right mind will lend them any money. People who have a vested interest in keeping GM going will continue to sing the praises of why people should invest in GM when the IPO comes out and I hope these same people who are so sure this is a good thing use their life savings and/or borrow money to invest in the proposition.
GM employees and union should buy enough stock overall to gain a controlling interest. That way if the company does well they are directly to benefit and if they do poorly then the rest of us taxpayers aren’t throwing our money away. Once you become a business owner, you learn how much it costs to run a business.