GM To Begin Repaying Aid By Year-End
WASHINGTON — General Motors Co. will begin paying back $6.7 billion in U.S. government loans by the end of 2009 and could pay off that full amount as early as 2010, five years ahead of schedule, CEO Fritz Henderson said Monday.
The government debt represents about 13 percent of the $52 billion that U.S. taxpayers have invested in General Motors, the majority of which was exchanged for a 61 percent ownership stake in the company.
GM said Monday it lost $1.2 billion from the time it left bankruptcy protection through Sept. 30, showing better results than the auto company had reported in previous quarters and signaling the auto giant is beginning to rebound.
Under the plan to pay back the loans, the Detroit automaker will make quarterly payments of $1 billion to the U.S. government and $200 million to the Canadian government beginning in December. GM would be on track to pay off the $6.7 billion U.S. debt and a $1.4 billion debt to Canada by the middle of 2011, well ahead of a mid-2015 deadline to repay the two governments.
But Henderson said if the company's finances were in "reasonable condition" by June 2010, GM could repay the full amount next year.
"It's a commitment of the company that we need to start doing this," Henderson said.
He said GM was in a position to make the payments ahead of schedule because the company performed better than expected during the bankruptcy and the company's sales and overall performance since then have been modestly better than expected. The automaker will draw on about $13 billion that remains deposited in escrow by the government to help make the payments.
Even if GM pays back these loans early, government investigators have questioned whether taxpayers will recoup their full investment in GM and fellow bailed-out automaker Chrysler Group LLC. GM, which exited bankruptcy as a new privately held company on July 10, has said it hopes to sell stock to the public late next year so taxpayers can recoup at least part of their remaining investment.
However, the Government Accountability Office said in a report issued earlier this month that the automakers' share values would have to soar to levels they didn't even approach when they were healthier for the $80 billion in taxpayer loans to be completely repaid.
Henderson, responding to the GAO report, told reporters "it is my mission to disprove the GAO."
Henderson said the repayment plan would allow GM to pay down a substantial portion of the government debt by the time the company goes public.
GM Chairman Ed Whitacre said last week that GM was committed to repaying its government loans.
"Can GM pay back its loans? You bet," Whitacre said during an address at Texas Lutheran University in Seguin, Texas. "I can't tell you when, but it won't be very long." However, Whitacre also said the timing of any GM IPO remains uncertain and depends on when the company returns to profitability.
The Treasury Department has spent more than $454 billion through its $700 billion Troubled Asset Relief Program. Forty-seven recipients have paid back nearly $73 billion, with the program set to expire Dec. 31.
Inspector General Neil Barofsky, the man who watches over the government money given to banks and other institutions to avert a financial collapse, said last month he thought it was too early to say how much will be repaid to the taxpayers but believed "it's unrealistic to think we're going to get all of that money back."
The government has already seen some of its TARP investments wiped out. Small business lender CIT Group filed for bankruptcy protection earlier this month, making it unlikely taxpayers will recover any of the $2.3 billion in aid the U.S. sunk into the company last fall.
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AP Auto Writer Tom Krisher in Detroit contributed to this report.
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KEN THOMAS | 11/16/09 09:29 AM |