I'm Ed Whitacre from General Motors. We want to make this a company all Americans can be proud of again.
May 1, 2010 11:58 AM Subscribe
Remember the General Motors bailout? You may have seen the commercial GM has been airing where GM CEO Ed Whitacre brags about paying back this loan "in full with interest, five years ahead of the original schedule". Ever wonder how that was possible? Reason.tv explains.
From a Forbes.com column:
From a Forbes.com column:
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...
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.
In order to recover that investment, the government has to sell its equity. It plans to do that only when GM becomes a publicly traded company once again. GM was hoping to turn a profit by the end of 2010 and float an initial public offering this winter. However, GM Chief Financial Officer Chris Liddell, when queried about that timeline a few days ago, demurred. The offering will be made, he said, "when the markets and the company are ready."
...Magliano too maintains that the company will be able to pay back taxpayers if the industry is able to ramp up annual vehicle sales from the expected 10.8 million this year to 17 million in 2014 and GM captures 20% of these sales.... The General Accountability Office, on the other hand, remains deeply pessimistic. It concluded in a December report (which a more recent April report has said nothing to contradict, despite media spin to the contrary) that: "The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially more than they have in the past."
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