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Government Lost $9.26 Billion Saving Auto Industry

Treasury made more than $2 billion on GMAC deal.

by on Dec.30, 2014

The Treasury exited GM more than four years after the maker's 2009 bankruptcy.

The U.S. government lost less than $10 billion rescuing the auto industry, which was four times less than some estimates.

The Treasury initially estimated the loss would be $44 billion, but revised it to $30 billion in 2009. Under government accounting rules, the U.S. Treasury actually lost $16.56 billion on paper because interest and dividends paid isn’t applied toward the principal owed.

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The government was repaid through a combination of stock sales, partial loan repayments, dividends and interest payments. (more…)

GM Looking to Rebuild Its Role in Auto Financing

Maker could abandon partnership with Cerberus.

by on May.12, 2010

An Ally no more?

Four years after selling a controlling stake in its finance subsidiary, GMAC, General Motors is reportedly looking for a way to get back into the auto loan business.

That could lead it to buy out Cerberus Capital Managerment, its private equity partner in what is now known as Ally Financial, Inc., or the Detroit automaker could set up an entirely new “captive” finance subsidiary, according to well-placed sources.

A senior GM official dismissed the story as “speculation,” though numerous company officials admit the automaker has been increasingly frustrated with its old lending unit and the way it has been managed by Cerberus since the 2006 sale.

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Awash in debt run up by bad housing loans, the former GMAC has stayed afloat only with the assistance of $17.2 billion in loans from the U.S. Treasury, which now owns a 56.3% stake in the lender.


GM Pays Back Loans from U.S. Treasury and Canada

This is only a small portion due to taxpayers, on the hook for roughly $50 billion, and need an IPO to succeed for the rest.

by on Apr.21, 2010

Still working for the taxpayers - U.S. and Canadian.

In a ceremony at GM’s Fairfax, Kansas plant late this morning, Chairman and CEO Ed Whitacre said that GM has made its final payment of $5.8 billion to the U.S. Treasury and Export Development Canada, paying back the cash part of its government loans in full, and ahead of schedule.

This confirmed news reports earlier this week that the company would do so in an attempt to remove the right wing stigma of “Government Motors” from the vocabulary of critics and more importantly potential buyers.

Ken Zino, editor of  TDB, had an exclusive report – see Limbaugh Carrier Airs GM Loan Repayment Ad – about how a right wing talk radio station revealed the payback ahead of the announcement by running a taxpayer paid spot, many versions of which are now airing on TV and radio stations. Presumably, print ads will follow tomorrow.

The announcement came along with the promise of an investment of $257 million at the Fairfax and Detroit Hamtramck assembly centers.

The money will prepare Fairfax to build the next generation Chevrolet Malibu, and make Detroit Hamtramck a second source for Malibu. This is an optimistic step taken to “ensure that Chevrolet can meet demand” for its new mid-size sedan.

Whether such demand appears remains to be seen.

However, in fairness, GM’s recent product launches have been more successful than the previous ones leading up to its bankruptcy last year.

GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles such as the Chevrolet Malibu and Buick LaCrosse “we build here in Fairfax,” said Whitacre.

Follow the money

The U.S., Canadian, and Ontario governments, as part of the launch of the new GM, provided controversial loans of $8.4 billion and took large equity stakes in the new company. Today’s payment of $5.8 billion ($4.7 billion to the U.S. Treasury and $C1.1 billion to Export Development Canada) completes the payback of these loans, but does not get taxpayers or GM off the hook.

Under the loan terms, GM had until 2015 to repay the cash part of the loan it closed out today. Overall, this return of what now totals ~$8.4 billion is only a small portion of the actual amount due to taxpayers, who fronted roughly $50 billion in the U.S. alone. For the balance due, taxpayers instead own a 61% stake in the privately held company, and a successful public offering or IPO remains crucial to the government getting its money back – as it subsequently sells or attempts to sell the stock to private investors.

Multiple studies, of course,  have said that taxpayers will never recover what was actually invested in GM. See Taxpayers Will Take Big Losses on Auto Bailouts.

However,  the same was said about an earlier taxpayer investment in Chrysler Corporation, under the pugnacious Lido Anthony Iacocca, who paid back every cent with interest.


GM Expected to Pay Off U.S. Loans on Wednesday

Aiming to win back right-wing skeptics who’re shunning the automaker.

by on Apr.20, 2010

Why is this man smiling? GM CEO Ed Whitacre may be thinking about paying off government loans, staging an IPO, expanding a key plant -- and winning over bailout skeptics in Washington.

We’ve become an angry nation, and whether it’s health care, gun control, Sarah Palin or Tea Parties, there’s something for everyone to get worked up about.  Like General Motors, which seems to cross the political spectrum when it comes to those angered by the tens of billions of dollars the company received from the federal treasury to keep it afloat last year.

No wonder Chairman and CEO Edward Whitacre Jr. is willing to draw down the struggling automaker’s bank account in a bit to placate critics.  The tall and lanky Texan has already authorized two repayments – for a total of $2 billion — and, reports suggest, Whitacre will have some more news when he visits the GM plant in Fairfax, Kansas, tomorrow.  Several well-placed sources suggest the primary headline will be the complete payback of the $4.7 billion the automaker still owes the government.

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The big question is whether Whitacre will also reveal the answer to an even bigger question: the timing of GM’s planned Initial Public Offering.  There’s little doubt the government would like to have that occur as soon as possible – potentially even before the upcoming election – so it could demonstrate its commitment to recovering the bailout funds that went into GM in the form of equity.  At the moment, the White House oversees a 61% stake in General Motors, though Whitacre has repeatedly insisted that, for the large part he hasn’t had to deal with daily oversight.

Until now, the CEO has been reluctant to set a timetable for an IPO, his new Chief Financial Officer Chris Liddell underscoring the importance of waiting for “the right time.”


Limbaugh Carrier Airs GM Loan Repayment Ad

Right wing talk radio station reveals news ahead of announcement in taxpayer paid spot.

by on Apr.19, 2010

Taxpayers to get some greenbacks back.

A New York radio station airing the Rush Limbaugh show this morning aired a commercial from General Motors Company announcing that it had made another payment to the U.S. government for taxpayer loans, which allowed it to emerge from bankruptcy last summer.

Limbaugh and other critics on the right widely derided the taxpayer bailout as creating an unwelcome “Government Motors.”

Moreover, right wing groups are boycotting GM products, but right wing oriented businesses are apparently accepting taxpayer money.

Polls before, during and after GM bankruptcy reorganization also show a majority of Americans as opposing the idea of government intervention in both the automotive and financial sectors.

Click on chart to enlarge.

GM had previously said it wished to pay another some more of $4.7 billion owed to the U.S. government ahead of time, possibly as early as June. Two billion dollars have already been returned. (About $C1.1 billion will also be repaid to Canadian and Ontario governments.)

GM Chairman and Chief Executive Edward Whitacre Jr. was to make the announcement this Wednesday at a media event in Kansas City where the Chevrolet Malibu is assembled.

Under the loan terms, GM has until 2015 to repay the cash part of the loan, but the automaker is pulling ahead its payments in the absence of any pre-payment penalties in an attempt to silence critics of its bailout.

Overall, this return of $6.7 billion is only a small portion of the actual amount due to taxpayers, who are on the hook for roughly $50 billion. For the balance, taxpayers own a 61% stake in the privately held company, and a successful public offering or IPO remains crucial to the government getting its money back. Multiple studies have said that taxpayers will never recover what was invested. See Taxpayers Will Take Big Losses on Auto Bailouts


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.


Whitacre Won’t Rule Out Staying on as GM CEO

Automaker plans to pay back government TARP loan by June 2010, but won’t set IPO date.

by on Dec.15, 2009

The search is on, but could Ed Whitacre, Jr. be ready to turn his Acting CEO title into a more permanent one?

The search is on, but could Ed Whitacre, Jr. be ready to turn his Acting CEO title into a more permanent one?

For a man who admits getting lost in Detroit’s maze-like Renaissance Center, the corporate headquarters of General Motors, Chairman and acting CEO Ed Whitacre is quickly finding his way around the troubled automaker.

And he appears to like what he’s seeing.  In his first face-to-face meeting with reporters since the ouster of former CEO Fritz Henderson, early this month, the tall and lanky Texan said GM is actively looking for a permanent replacement for the chief executive position, but Whitacre pointedly declined to rule out the possibility that he could drop the “Acting” from his expanding list of titles and stay on as GM’s CEO.

“We’re looking for someone who can be a leader of this company,” the former ATT boss explained, adding that the next GM CEO wouldn’t necessarily have to come from the auto industry, nor would that person have to be a CEO now, but it would take “an inspirational leader who’s familiar with a big company.”

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How long might the search take?  It’s only gotten underway, said Whitacre and, “I don’t have any definite timetable.  Not next week, not a year.”  A challenge, the executive said, is that “we can’t pay much” because of a federally-mandated pay cap on companies that took a government bailout.  But anyone seeking the CEO post is likely to be motivated not just by compensation, “but by leading a big company,” especially one with the chance to rebuild its former grandeur.


Feds Fork Over Another $2 Billion to GM

Treasury loans keep GM in the auto game while government decides whether to hold 'em or fold 'em and close GM by June.

by on Apr.24, 2009

The GM "Total Confidence Plan" isn't persuading secured debtholders.

The GM "Total Confidence Plan" isn't persuading secured debtholders who'd rather cash out.

General Motors has just confirmed that it will draw an additional $2 billion in U.S. Treasury loans to maintain adequate liquidity, as the company continues tense negotiations with bondholders and unions about the concessions needed to revise its business plan.

President Obama’s Auto Task Force rejected GM’s February submission last month as “not viable” because it didn’t clean up its balance sheet enough and gave GM until June 1 to come up with a better plan, less encumbered with fixed costs and debt.

The latest bridge loan means taxpayers have now lent GM $15.4 billion, a relatively small – some say paltry — sum compared to the hundreds upon hundreds of billions given to the financial institutions that are the root cause of the current global Great Recession.

While the need for the additional funding of $2.6 billion was contained in GM’s February “viability report” to the U.S. Treasury, Fritz Henderson, GM’s CEO, in his last press conference a week ago, was non-committal about GM’s need for more cash. In March, the company surprised everyone by not taking a projected $2.3 billion loan, saying that its cost cutting and cash flow were better than expected. Considering the timetable facing Chrysler whose deadline is next week, Henderson said, “I would expect (GM) could pick up the pace in the next couple weeks.”

Perhaps the timing is coincidental, but just yesterday GM announced drastic production cutbacks and layoffs, ranging from one to nine weeks, for virtually all of its North American manufacturing  plants. Since auto companies book the revenue on vehicles when they leave the plant gate on their way to dealers, production cuts automatically equate to lost revenue.

The announcements yesterday were a bitter foretaste of what a GM bankruptcy will look like. So the closings no doubt garnered the attention of state and national politicians, as media reports and TV coverage described or showed the dire consequences of shutting down so many plants. Thousand of suppliers will also be negatively affected. (more…)