GM to pay off $5.8B bailout loans early
|April 20, 2010||http://detnews.com/article/20100420/AUTO01/4200366|
GM to pay off $5.8B bailout loans early
Move is seen as important step for company to go public again
Detroit News Washington Bureau
General Motors Co. is repaying its remaining $5.8 billion in bailout loans to U.S. and Canadian taxpayers two months ahead of schedule.
It’s another promising milestone for post-bankruptcy GM, which last month reported better-than-expected earnings for the last quarter of 2009.
GM Chairman and CEO Edward Whitacre Jr. will make the official announcement Wednesday at the automaker’s Fairfax, Kan., plant, two people briefed on the plans said Monday. The actual payment could be made as early as today.
The Detroit-based automaker also will announce a new investment at the Kansas plant, which could include adding jobs, a person familiar with the matter said.
The final loan repayment will total $4.7 billion to U.S. taxpayers and about $1.1 billion to the governments of Canada and Ontario.
The U.S. treasury will still own about 61 percent of the automaker, however, because about $43 billion of the $50 billion in aid that the government gave GM during its bankruptcy last year was converted to equity. Canadian taxpayers swapped about $8 billion for a 12 percent stake.
Also Wednesday, Whitacre will make his first visit to Capitol Hill since he took GM’s helm in December. He is to meet with House Speaker Nancy Pelosi and Michigan lawmakers.
Under its agreement with the Treasury Department, GM was to repay the loans by June 30. The automaker will tap unused Treasury funds being held in escrow to repay the government. The early repayment is aimed in part at reassuring American consumers who were turned off by the massive government bailout that saved GM from collapse.
It will take months or even years to determine if taxpayers will be completely repaid because the Treasury can’t start selling its shares until GM holds an initial public stock offering. That likely won’t happen until next year.
Aaron Bragman, an auto analyst at IHS Global Insight in Troy, said Monday he didn’t think repaying the loans would influence consumer thinking.
"People have pretty much made up their minds whether the bailout was a good thing or a bad thing," he said.
Bragman said the repayment’s bigger impact is a step by GM toward independence from the government.
The Treasury isn’t likely to completely sell off its shares for at least two years, officials have said.
"This is an important step on the road to an IPO," Bragman said.
GM spokesman Greg Martin would neither confirm nor deny the automaker’s repayment plans. A Treasury Department spokeswoman, Meg Reilly, also declined to comment.
GM has already repaid $2 billion of $6.7 billion in U.S. loans, and about $400 million of $1.4 billion in Canadian government loans.
GM Chief Financial Officer Chris Liddell said this month that GM could report a profit as early as this year.
The automaker lost $3.4 billion in the fourth quarter of 2009 on revenues of $32.3 billion.
The White House plans to embrace the news of GM’s full repayment as a sign of its post-bankruptcy progress. President Barack Obama has praised GM’s payments to date as a sign of progress.
Bailout was ‘right thing’
"A year later, GM is hiring again, on the verge of reopening hundreds of dealerships," Obama said this month. He said that’s evidence the bailout "was the right thing to do."
In meeting with Pelosi and others in Washington on Wednesday, Whitacre will continue GM’s effort to shore up its sometimes testy relations with Congress — especially with Republicans who opposed the $50 billion bailout and with members of both parties over its plans to shrink its dealer network by year’s end.
Whitacre has sought to bolster GM’s relationships with Congress, and installed two new lobbyists in January with ties to AT&T Corp., where Whitacre served as chairman and CEO.
He has taken a much softer line with GM dealers than his predecessor, Fritz Henderson. A number of lawmakers were distressed by GM’s plans to prune its dealer network as part of its restructuring.
The automaker last month offered 661 dealers the chance to remain open. It sent letters to more than half of the 1,160 dealers that were appealing orders to close.
Spotlight on Volt, Cruze
GM is using Earth Day in Washington to tout its extended-range Chevrolet Volt and its new high-mileage Chevrolet Cruze.
On Thursday, the Volt and Cruze will be on display outside the Russell Senate Building for lawmakers and aides to test drive.
The Volt will be on display on the National Mall near Seventh Street on Saturday and Sunday.
Bloomberg News reported Monday that GM will expand its Fairfax factory and may add a new product.
"They plan on shooting some kind of commercial," said Jeff Manning, a 29-year-old GM employee who has headed United Auto Workers Local 31 at Fairfax for five years.
Whitacre just visited the Fairfax Assembly plant March 18, with GM Vice Chairman Steve Girsky. "I don’t know why he would be coming back unless it was something major," Manning said.
Fairfax assembles the Buick LaCrosse and Chevrolet Malibu, and has run three shifts since January with 3,500 hourly employees. Laid-off GM workers from around the country were hired to fill slots at the Kansas plant.