Credit where it's due: GM Pays off Gov't Loans w/Interest

cash for clunkers.

 

I applaud them, hopefully they can continue to pay back the debt to the US taxpayer.

 

Problem is, the GM bankruptcy left behind BILLIONS more in toxic abandoned GM manufacturing sites that became a part of GM's "ha ha ha, we don't have to pay for that" bailout.

New GM Shirks Responsibility for Old Toxic Dumps and Mercury Disposal | Hybrid Cars

On the other hand, I WILL give credit to GM, if they'll pay for the cleanup, and the health issues caused by living near them. I won't be holding my breath, but it WOULD give value to their green flag waving commercials.

I guess now that GM is in the Black (notwithstanding the above) ... the corporate leadership can go back to flying around in the private jet again. sheez! am I a cynic, or what? don't answer that.


sorry, I don't respond well to hydrogen, AIG, and a few other goodies

 

Where did the money come from? Think about how much GM loss in the second half of last year, after filing for bankruptcy.

Looking ahead, what are GM's sources of profit?
.

 

For some time, I've been reading things tha suggest that the GM loan
"payback" is more a PR ploy than a realistic statement of real
movement towards getting off the public dole. At each payment there
have been frequent references in the various media. Typically, they
are just a regurgitation of the GM press release. But all along, there
have been analists and commentators who have said in effect, "Wait
just a minute!"

Here are some sites that tell of the other side of the coin, not all shiny
and bright it turns out. These quotes are meant to be teasers to lead
to members reading the whole article.

To be honest, I'm not entirely sure what's going on here.

Whether or not GM is actually "repaying its loan" is an open question.
Here's what the Wall Street Journal said back in January, 2010:

"General Motors Co. plans to begin paying back a $6.7 billion loan it
owes the U.S. government starting late this year, putting it on track to
potentially repay the entire note by the middle of 2011, said a person
familiar with the matter.

"But in a move that could be controversial and risky, the car maker
plans to use other money it received from the government to pay back
the borrowing... " WSJ.

"One critical disappointment, according to the Government
Accountability Office -- the Congressional Oversight Panel which is
overseeing the $700B USD bank and automotive bailout -- is that when
GM is publicly offered again, the government (and taxpayers) will
likely lose a massive amount of money on their investment. Current
estimates are that taxpayers will lose $25B USD on the
investment."
DailyTech - GM Races to Repay Government, Will Pay $1B USD Per Quarter

"Regardless of the sales strategies it uses, GM has to grow
substantially to reach the values at which the governments will
recover the entirety of their equity investments, according to an
analysis this month by the U.S. Government Accountability Office.

"GM needs a market capitalization of US$66.9-billion for the U.S.
Treasury to break even on its investment, the GOA said. The
automaker has never in its history been worth that much. At its peak
value in 2000, its market cap was US$57-billion."
Read more: GM move to repay loans more about PR than profit: analysts
GM move to repay loans more about PR than profit: analysts

"How much money was given to General Motors?
"In a press conference today Ron Bloom, auto task force leader said
that the total amount the Government paid General Motors was $49.5
billion. On December 31, 2008, Treasury agreed to make loan $13.4
billion to General Motors Corporation to fund working capital. Under
the loan agreement, GM was also required to implement a viable
restructuring plan. The first plan GM submitted failed to establish a
credible path to viability, and the deadline was extended to June 1.
Treasury loaned an additional $6 billion to fund GM during this period.
To achieve an orderly restructuring, GM filed for bankruptcy on June 1,
2009. Treasury provided $30.1 billion under a debtor-in-possession
financing agreement to assist GM during the bankruptcy. The new
entity, General Motors Company (New GM), began operating on July
10, 2009, following its purchase of most of the assets of the Old GM."
How will General Motors pay back their loans? | Lou Ann Hammond on carlist.com

"And here's the problem: as long as the debt was outstanding -- and
accruing interest -- the U.S. government could count on getting some
money from GM off the top. Now, the U.S. will become just another
(albeit large) shareholder in GM -- and will have no way of extracting
any cash from the company unless the stock does well and the U.S.
can sell it. That is unlikely to happen without taxpayers realizing a
large loss on the "investment."

"The real question is why, if GM was able to repay the loan so quickly,
we converted so much of our debt into equity. There is far more risk
to taxpayers with an equity stake and, given the very low likelihood of
the new GM ever achieving a market cap high enough to make us
whole on the equity, it looks like we left a lot of money on the table
with the equity conversion."
Does GM's Plan to Repay Debt Shortchange Taxpayers? - BloggingStocks

"So I asked Brooks, straight out: 'But the Spark won’t be made in
China, will it?' Brooks: 'We haven’t decided yet.' 'But not China?' 'We
haven’t decided yet'...

"You see, my spidey sense can’t help but see how the timing would
work out: you pay off the TARP money (but not the tens of billions in
equity) before you announce where you’re going to source the Spark
that is already in process. If that were to happen, taxpayers would be
justifiably furious–if their bailout served only to fund the first auto
company importing cars from China."
GM’s Dick Cheney and TARP Loans and Chinese Cars | Emptywheel

"Liddell is being far more cautious than GM CEO Ed Whitacre, who
told reporters and members of Congress at the annual auto show in
Detroit in January that the government will "make a lot of money" on
the GM bailout without having to wait very long.

"GM's stock would have to be worth about $67 billion for taxpayers to
get back all of their money. That may be a difficult target for GM to
reach once it goes public.

"Rival Ford Motor (F, Fortune 500), whose stock has soared nearly
500% in the last year as it returned to profitability and improved its
market share, has a market value of only $46 billion."
GM CFO: Government may not profit on GM investment - Mar. 17, 2010

"Rehab also demands acknowledging and turning away from
destructive behavior, such as flings with overseas models and a crazy
addiction to raw horsepower. And it involves being more sensitive to
needs of sober-minded consumers who have long implored the
company to embrace thrift, value and quality.

"But GM, having taken the cure, is telling the market it's absolutely
ready to get out there again and win.

"Americans love comeback stories. Just look at Ford. Practically given
up for dead a few years ago, Ford Motor Co. is now one a shining
example of automotive redemption in the face of overwhelming
economic odds.

"Can General Motors pull off a similar comeback? Maybe.

"But when it returns to the marketplace, its squeaky clean accounts,
revamped product line and ever-so-good intentions are still going to
be measured against its $3.4 billion fourth-quarter loss and persistent
cash burn. Until it manages to turn those around, GM's public offering
remains a leap of faith for investors."
GM gets ready to exit rehab MarketWatch First Take - MarketWatch

"GM and Chrysler both went through government-orchestrated
Chapter 11 bankruptcy protection last year.

"They emerged as restructured companies able to shed huge debts but
remain responsible for the pension plans of workers and retirees. The
GAO said the future of those plans "remains uncertain" as the firms
struggle to make money again.

"Chrysler and GM will be able to meet their funding needs if they are
profitable, the GAO said. The Treasury Department, which oversees
the government's sizable stake in the two companies, thinks that will
happen.

'But if GM and Chrysler falter and are forced to terminate their
pensions, the government's Pension Benefit Guaranty Corp. insurance
program would have to absorb $14.5 billion worth of company
obligations to workers.'
GM, Chrysler pensions 'uncertain,' says GAO

"Strong Europe car sales data hides imminent dive; Ford in gear

"After a sturdy but subsidy-induced first quarter for European car
sales, the market is about to turn nasty and Ford and GM's European
subsidiaries are poles apart as they prepare for the debacle.

"Experts don't expect healthy conditions to return anytime soon.

"Ford has prepared itself well, with its nifty looking small vehicles
doing well as cash-for-clunkers subsidies meant more buyers looking
at the cheaper end of the market. But GM's Opel and Vauxhall
subsidiaries are struggling with a less attractive model range and a
new car, the Astra, which is still to induce the wow factor in potential
buyers. GM's image is not being helped by long-drawn-out negotiations
with European countries, led by Germany, for a $2.4 billion aid
package.

"On the surface, West European car sales looked healthy in the first
quarter, but in fact the market is about to go into reverse as the
impact of government scrapping subsidies runs out."
Strong Europe car sales data hides imminent dive; Ford in gear | detnews.com | The Detroit News

Only time will tell what GM's future will be.
Let's hope it turns out for the better.

 

figures lie and liars figure. enron, made off, who knows? not us. but then a few billion here, a few billion there, pretty soon, you're talking real money!

 

I think it's great that they paid off the loan, but I'm not overly impressed. I'll save that for after the recovery, when taxpayers get back the rest of the money.

Tom

 

Paying back thier loan, another viewpoint here
GM PAYBACK, WAS SHUFFLE ABOUT AVOIDING THE TARP TAX
The bottom line seems to be that the TARP loans were “repaid†with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials.

Grassley: Was GM’s “Payback” Shuffle About Avoiding The TARP Tax? | The Truth About Cars

more smoke and mirrors

 

As I understand it, most of the government loans was with the "old GM" they are not obligated to pay back....they paid back what they are required to.

Correct?

 

Geez, it's SIMPLE.

GM could not be on the stock exchange - so they found private funding to reimburse the US & Can governments.

Now GM owes the SAME amount of money, but to private investors. It was just to get out of the Chapter 1 bankruptcy, and be back on the stock market. They are still in dire straights though. Care to guess where the private money came from ????

GM top brass is surely laughing at all this free positive publicity.

 

No such animal as chapter 1 bko. Guessing you meant 11?

 

Detroit Free Press reported GM is spending $895 million to retool plants for their new V-8 engines.

Keep in mind outgoing Bob Lutz has said in five years V-6s will be rare, let alone V-8's.

GM shut down a commercial plant that made a truck model I can't recall that competed with F350's and larger - they don't make that many commercial trucks.

So what is GM going to do with the V-8's?

Only conclusion I can draw is they still think full-sized SUVs are a big market.

This does not give me confidence GM learned their lesson.

I get this picture of a drunk with liver disease dealing with it by switching from Bud to Bud Light.

 

The FTC is investigating the ads GM placed about repaying their loans. Apparently they simply used some bailout money to pay back some other loans.

FOXNews.com - GM Could Be in Hot Water With FTC Over Truth in Advertising

 

Some folks think that GM's funny-money "payoff" is just a set-up for
another even bigger government money handout:

Still Government Motors

"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.

More at Forbes

I've read, but can't find the cite that GM has not made a profit in
six years. (Coud use some help here.)
Just when will any of this money be truly paid back?

I wonder how all this is playing "Somewhere in Flyover Country"

 

yep, misleading

Yep, I tend to agree w/the above and the Forbes folks at Forbes.com - Magazine Article. I think to the average American TV viewer who has seen the commercials and doesn't know the details, they ARE misleading.

Ok, let's say GM didn't do a funny money shift and really did pay off the loan. The average viewer won't know about the 60% stake that government still has, the market cap GM would have to reach (~$60-$66.9 billion), which it has never reached in order to break even nor the $6.7 billion loan "repaid" vs. the ~$50 billion poured into GM.

Nevertheless, the message is out there and I'm sure a significant # of impressions have been made. It's just like the CNW Hummer vs. "dust to dust" junk science that refuses to die. That crap ends up being perpetuated by morons like Clarkson of Top Gear, a clueless college student and so on...

 

GM's lack of profits

GM Loses $6 Billion in First Quarter - Auto Observer
"GM's first-quarter loss puts the company's total losses since 2004, its last profitable year, at $82 billion. "

General Motors loses $4.3 billion, says profit is possible this year - from April 8, 2010
"Even so, GM has not earned an annual profit since 2004 and lost $88 billion between 2005 and its bankruptcy filing in June 2009. "

GM to Close Four Truck Plants, Shift Output to Cars (Update7) - Bloomberg.com
"GM hasn't had an annual profit since 2004."

G.M. Report Shows Loss, but Also Optimism - NYTimes.com
"G.M. has not earned a full-year profit since 2004. It lost $88 billion from 2005 to its bankruptcy filing June 1. Its 2010 first-quarter results will be released in May."

 

I'm glad that even detnews.com has an op ed pointing out how misleading the ads are.
GM ad glosses over the reality | detnews.com | The Detroit News

 

I thought I was over reacting (w/ getting mad) when the articles started to appear - how GM was spinning "we paid off the loan". But each person I show the articles to reacts the same way. You'd think the liars running GM would get tossed out. I just doesn't seam to happen.

 

GM is pathetic. They demand 60 Billiion or so to not close up shop, and return around 5% as a gesture of success.

Whatever