GM pays off U.S. bailout loans

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GM pays off its bailout loans
By Peter Valdes-Dapena, senior writerApril 21, 2010: 1:13 PM ET




NEW YORK (CNNMoney.com) -- General Motors has made a final payment of $5.8 billion to the U.S. and Canadian governments, paying off the last of its $6.7 billion in loans, the company said Wednesday.

"I am very pleased to announce that, as of today, General Motors has repaid, in full and with interest, the loans made last July by the U.S. Treasury and Export Development Canada," said GM chief executive Ed Whitacre, speaking at a plant in Fairfax, Kan., where GM builds Chevrolet Malibu and Buick LaCrosse sedans.


Whitacre also announced that GM would make two big investments for production of the next-generation Malibu: $136 million in the Fairfax facility, which will become the primary production point for the car, and $121 million in its Detroit-Hamtramck plant, which will provide additional production at times of peak demand.

GM has already begun manufacturing the Chevrolet Volt electric car in Hamtramck, where it also makes the Buick Lucerne and Cadillac DTS large cars.

On Tuesday night, the automaker wired $4.7 billion to the U.S. Treasury Department and $1.1 billion to Canada.

Getting Wall Street to pay up
"GM's ability to pay back our loans ahead of schedule is a sign that our plan is working," Whitacre said.

But the loan money is only a fraction of the financial support that the federal government gave to GM over the past 12 months to stop it from going out of business.


0:00 /4:19GM betting on the Volt
Overall, GM received $50 billion in federal help. In return, the government got $2 billion in preferred stock and 61% of the company's privately held common shares.

Taxpayers could recoup money from a possible sale of GM stock to the public in the future.

A White House report issued shortly after GM's announcement was upbeat on the progress that both General Motors and Chrysler have made since coming out of bankruptcy but noted that the government would likely not make a profit on the funds it had invested.

"Overall, the investments made by the prior and current administration in GM, Chrysler, and GMAC will likely result in some loss, but the U.S. Treasury anticipates it to be much lower than forecast last year," the report said.

Mark Reuss, president of GM's North American operations, said in an interview with CNNMoney.com that he was "positive" that GM's stock would ultimately be profitable for taxpayers.

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Yeah, GM used bailout money to repay the government loan

Grassley Slams GM, Administration Over Loans Repaid With Bailout Money

A top Senate Republican on Thursday accused the administration of misleading taxpayers about General Motors' loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money.


A top Senate Republican on Thursday accused the Obama administration of misleading taxpayers about General Motors' loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money.

Sen. Chuck Grassley's charge was backed up by the inspector general for the bailout -- also known as the Trouble Asset Relief Program, or TARP. Watchdog Neil Barofsky told Fox News, as well as the Senate Finance Committee, that General Motors used bailout money to pay back the federal government.

"It appears to be nothing more than an elaborate TARP money shuffle," Grassley, the ranking Republican on the Senate Finance Committee, said in a letter Thursday to Treasury Secretary Timothy Geithner.

GM announced Wednesday that it had paid back the $8.1 billion in loans it received from the U.S. and Canadian governments. Of that, $6.7 billion went to the U.S. treasury.

But Grassley said in his letter that a Securities and Exchange Commission form filed by GM showed that $6.7 billion of the tens of billions the company received was sitting in an escrow account and available to be used for repayment. He called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep.

"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," he wrote.

Vice President Biden on Wednesday called the GM repayment a "huge accomplishment."

But Barofsky told Fox News that while it's "somewhat good news," there's a big catch.

"I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings. ... It's actually from another pool of TARP money that they've already received," he said Wednesday. "I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through "a liquidation of its ownership interest."

Grassley criticized this scenario in his letter.

"The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government's ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment," he wrote.