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GM Regains Investment Grade Rating from S&P

Maker gets a much-needed endorsement.

by on Sep.26, 2014

GM CEO Mary Barra on the cover of the latest issue of Mary Barra.

Despite the recall of more nearly 30 million vehicles in the U.S. this year, concerns about subprime lending and a lackluster showing in the stock market, Standard & Poors has given GM a much-needed endorsement, raising the company’s credit rating to investment grade.

The announcement comes at a welcome moment for GM, which has watched its share price slide 20% since the beginning of the year, even while the S&P 500 has gained 20%. It also coincides with a generally positive cover story in Time magazine featuring CEO Mary Barra.

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Despite taking some serious hits in recent months, the ratings agency focused on the positive side, among other things, citing the progress of GM’s European turnaround plan, which could put the company back on a breakeven level after losing money for the past 15 years. S&P also noted the automaker’s healthy cash flow and the limited reputational and market share damage from what has become a record number of recalls.

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Feds Rapidly Selling Off GM Shares

“Government Motors” no more?

by on Mar.12, 2013

GM Chairman and CEO Dan Akerson has made it clear he wants the government to sell off its stock ASAP.

It may soon be “Government Motors” no more.

While the White House has set a deadline of April 2014 to sell off all its remaining shares of General Motors, it appears to be racing to meet that target sooner than expected, the Treasury selling off nearly $490 million in stock last month, according to a report provided to Congress.

But at the price taxpayers received – anywhere from $26.19 to $29.36 per share – that could mean an eventual loss on the 2008 – 2009 GM bailout of billions of dollars.

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At one point, the U.S. Treasury held a majority stake in GM, prompting critics of the bailout to deride the maker as “Government Motors.” Some right-wing pundits went so far as to call for a boycott of GM products, along with those from Chrysler, which also received federal assistance.

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Treasury Begins Process of Selling Off Remaining GM Shares

Targets exit of “Government Motors” by April 2014 – or sooner.

by on Jan.21, 2013

The GM logo atop the maker's Detroit HQ.

The Obama Administration has begun the countdown as it takes the next step in the process of selling off its remaining stake in General Motors by no later than April 2014.

The move comes a month after the U.S. Treasury sold off 200 million shares of GM common stock for $5.5 billion – but also coincides with a jump in the maker’s stock price. Even so, analysts anticipate taxpayers will ultimately lose billions on the federal bailout of the automaker – though the rescue effort that also saved rival carmaker Chrysler has been credited with saving as many as 1 million American jobs.

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“This company will always feel a debt of gratitude to the American and Canadian taxpayers for stepping in,” GM Chairman and CEO Dan Akerson told reporters during a recent roundtable session, his comments also referring to aid the maker received from the Canadian treasury.

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GM Gets 1st Investment-Grade Rating Since ’05

But key debt rating agencies like S&P yet to follow.

by on Sep.14, 2012

GM's headquarters in Detroit.

General Motors’ ongoing turnaround effort got a significant endorsement today as it got its first debt upgrade to investment grade from Toronto-based ratings agency DBRS.

The big ratings agencies have yet to follow, though several have recently indicated their belief that GM is moving in the right direction and could follow the move by DBRS.  An upgrade by ratings agencies like Moody’s and Standard & Poor’s, in particular, could significantly lower the automaker’s borrowing costs while also coaxing investors to drive up GM’s sagging stock price.

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Today’s announcement was particularly significant in light of the ongoing problems General Motors has been having in Europe, where it is expected to lose in excess of $1.5 billion for all of 2012 – going into the red for the 14th consecutive year.  That recently prompted analysts at Morgan Stanley to forcefully recommend GM get rid of its German-based Opel subsidiary.

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GM Pumps $2 billion in Stock Into Pension Fund

60 million shares for underfunded program.

by on Jan.14, 2011

GM moves to further cut its pension liabilities.

General Motors has taken another big step towards correcting one of its last big financial headaches, contributing 60.6 million shares of common stock into its chronically underfunded pension program.

Worth over $2 billion, the stock has been added onto a $4 billion cash contribution the automaker made last month.  Nonetheless, that still leaves $21.4 billion more that GM must ultimately come up with the cover its pension liabilities.

Immediately prior to the cash contribution, the maker owed $17.1 billion to its U.S. salaried and hourly workers’ pension programs and another $10.1 billion to its various overseas programs.

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Those figures actually might shrink on their own.  They reflect the decline in value of various assets in the pension program portfolios that were slammed by the recession.  As those assets regain some of their value the shortfall could shrink substantially.

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GM Aims to Stabilize Capital Spending

Maker hopes to “eliminate the big swings,” says CFO Liddell.

by on Jan.12, 2011

GM moving to put its financial house in order, says CFO Liddell.

In the future, General Motors expects to hold capital spending steady from year to year and to avoid dramatic peaks and equally dramatic valleys.

“We want to eliminate the big swings in capital spending,” GM Vice Chairman and Chief Financial Officer Chris Liddell said.

Over the years, capital spending has been reduced dramatically and many projects cancelled during recessions, he said.  “But that’s enormously expensive,” he added.   “A lot of money was wasted,” he said.

(GM now struggling with bankruptcy-related product delays. Click Here for the story.)

It’s better in the long run for GM to hold capital spending steady during both good times and bad, he said. “You have to have control of spending,” stressed Liddell, who joined GM after serving as Microsoft’s CFO.

Stronger finances, he asserted, will enable GM to hold capital spending level during a downturn.  And, as General Motors enters 2011, its finances are steadily improving  –though the company still faces challenges, GM’s top financial officer said Tuesday.

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GM Slashes Another $4 Bil In Debt

Maker moves to cover under-funded pension programs.

by on Dec.02, 2010

GM moving to put its financial house in order, says CFO Liddell.

General Motors Company has contributed $4 billion to its long-underfunded hourly and salaried pension plans in the United States.
Chris Liddell, GM vice chairman and chief financial officer, said $2.7 billion was contributed to the hourly plan and another $1.3 billion to the salaried plan.

The $4 billion contribution was another step towards putting the company’s financial house in order. GM’s U.S. pension plans currently provide benefits to approximately 688,000 participants, said Liddell.

“This pension contribution puts us another step closer to our goal of fully funding our pension plans and achieving minimal debt. With a healthy balance sheet, a lower cost structure and focus on revenue generation, we continue to put in place the fundamentals for sustainable success,” Liddell said.

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All of the company’s U.S. pension plans were, as of December 31, 2009 underfunded in total by $17.1 billion.  The company will next re-measure its U.S. pension plans at year end 2010 and their funded status will be included in the 2010 Form 10-K.

The pension liabilities were one of the key debts that remained after GM completed its bankruptcy, last year.

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GM Reducing Leverage By $11 Billion

Actions should save $500 mil in annual interest – and enhance appeal of IPO.

by on Oct.28, 2010

The General continues prepping for its IPO.

In a series of actions clearly designed to improve the maker’s balance sheet in advance of its planned IPO, General Motors has announced it will reduce debt and improve its pension funding position by a total of $11 billion — reducing annual costs by $500 million, in the process.

While GM has yet to provide details of its planned stock offering, company insiders make no secret of the need to present as positive a picture as possible if investors are to come up with the billions needed to begin paying back the federal bailout that pulled the maker out of bankruptcy last year.

Among the most significant steps GM announced today, it will repay $2.8 billion to the retiree medical trust run by the United Auto Workers Union, a move that will result in a $200 million non-cash gain in the fourth quarter of this year.

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It will complete a $5 billion “revolver,” or revolving credit line with a syndicate of banks.  Though the maker claims it does not plan to tap the line, it provides a back-up source of liquidity, something potentially quite useful considering the uncertain economy.

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GM Paying Down Another $1 Billion in U.S. Debt

Maker also earmarking $192 mil for Canadian loans.

by on Mar.26, 2010

Why is this man smiling? Perhaps it helps that GM CEO Ed Whitacre plans to pay down another $1 billion in government loans.

With a goal of paying off its entire debt to the U.S. Treasury this year, General Motors has anounced it will write another $1 billion check to Uncle Sam by April 1 – and that’s no joke.  The maker also plans to send a $192 million debt repayment to Ottawa.

That would leave another $4.7 billion to be repaid to Washington for the bailout the maker received, last year, to keep it in business; GM has already repaid $1 billion.  And its goal is to be able to tear up the loan papers by June.

“GM has every confidence that the remainder of the loans will be paid in full by June 2010; five years ahead of schedule,” CEO Ed Whitacre said in a statement from the automaker.

For those trying to do the math, GM got $6.7 billion in federal loans during a financial crisis that ultimately led to its declaration of bankruptcy.  But the “new” General Motors also received billions more that was invested in the form of equity, the federal government now owning a full 61% of the reborn automaker.

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The Canadians tossed some of their own money into the hat and received a smaller equity stake, as well.

It’s clear that Whitacre and his team would like to say farewell to the government as soon as possible.  Though the CEO insists Washington has been a mostly hands-off investor, it has stuck its nose into the automaker’s Renaissance Center headquarters on more than a few occasions.

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GM Pays German Government another €200 Million

Government loans are being slowly paid as reorganized GM generates cash. More than $29 billion in debt is outstanding.

by on Nov.16, 2009

Angela Merkel, German Chancellor

The German government called the loan when it became clear that German jobs would not be overly protected in a GM reorganization.

General Motors has returned to German taxpayers another €200 million ($299.3 million) on the Opel bridge loan that was made last spring when it was planning on selling its loss making European arm.

GM has since decided to reorganize Opel by itself,  and the German government called the loan when it became clear that German jobs would not be overly protected  compared with other Opel/Vauxhaul locations in the United Kingdom and Europe.

GM now has an outstanding balance of €400 million, which GM expects to pay back by November 30,” according to Enrico Digirolamo, GM Europe Vice President and Chief Financial Officer.

With production restarted after its 60-day bankruptcy proceeding, GM is once again generating cash and paying down some of its debt.

With the Opel bridge loan, GM had a balance of €900 million (~$1.3 billion) as of September 30, 2009. Opel has already repaid €500 million (~$0.7 billion) of that in November, and will repay the remaining €400 million (~$0.6 billion) balance by the end of the month. The cash balance in Europe as of September 30, 2009 was $2.9 billion.

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