Daily Auto News GM Pays Back Government Loans 5 Years Early
Daily Auto News
Think back to last summer. Remember the headlines? The American auto industry teetered on the edge of a cliff. The CEOs of Detroit’s Big Three automakers traveled to Washington in a private jet to beg for charity. GM’s chairman resigned (with a push from the Obama administration) in disgrace. Congress began debating a bizarre-sounding plan to pay to scrap thousands of old cars, and help Americans buy replacements. And the Obama administration, over cries of protest from many, lent billions to help pull General Motors and Chrysler out of bankruptcy…while many pundits predicted unavoidable failure for both.
Well, apparently, it worked.
ABC News reports, “General Motors today repaid $8.1 billion in government loans, five years ahead of schedule and nine months after the troubled auto giant declared bankruptcy, signaling that the auto maker may be on the path to profitability.” Announcing the payment to a plant full of GM workers, Chairman Ed Whitacre (who, we should note, was a retired phone company man last June) announced, “As of today, GM has repaid in full and interest the loans made last July by the U.S. Treasury and Export Development in Canada.”
The development does not mean that taxpayers have gotten back every dime put into America’s largest automaker. The AP notes, “The U.S. government still owns 61 percent of GM,” with the Canadian government retaining a much smaller share. The government gave GM $8.1 billion in loans, and spent about $45.3 billion buying majority ownership of the new company as it emerged from bankruptcy. The government will get that money back only if it can sell the stock at a profit when GM finally goes public, at a date that has a yet to be determined.
Whitacre, the AP reports, “said he expects an initial public offering in late 2010 or early 2011. GM officials said it likely will take years for the governments to divest themselves fully.” However, “he said there is a ‘high’ possibility that taxpayers will end up being fully compensated” when that sale happens.
The company was able to repay the loans so early, in large part, because it’s doing so much better than expected. GM shed its four worst-performing brands (Pontiac, Saab, Saturn and Hummer) over the last 10 months. Wired explains, “General Motors has seen sales of its four remaining brands — Chevrolet, GMC, Buick and Cadillac — climb 36 percent over the same period last year.” Some popular new models, “including the Chevrolet Camaro, Cadillac SRX and Buick LaCrosse, are selling briskly and remain in short supply at many dealerships.”
The post-bailout news isn’t entirely good. The Wall Street Journal notes, “Chrysler, while upbeat, still said it has posted losses of nearly $4 billion since leaving Chapter 11 bankruptcy protection last year.”
The New York Times adds, “Chrysler is not in a position to begin paying back the money it borrowed and made no mention of repayment Wednesday.”
But, the Journal sums the up the state of the auto industry this way; “A year after predictions that the industry and its suppliers could face a drastic decline, the situation has clearly stabilized.”
One year ago, that’s a statement few of us would have thought we’d ever see in the Wall Street Journal.
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