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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.


Chrysler Group Loses $3.8 billion in 2009

However, company claims Q1 profit based on lower costs.

by on Apr.21, 2010

Chrysler is struggling with weaning itself off profit sapping incentives while it attempts to peddle an aging product line.

Taxpayer owners in Canada and the U.S. of Chrysler Group received mixed news this morning as the reorganized company posted an operating profit of $143 million during the first three months of 2010, but also posted a large loss for 2009.

Chrysler, managed by 20%-owner Fiat SpA, attributed the positive development to reduced  costs, as well as revenue from the newly introduced Ram heavy-duty pickup truck.

Revenue rose to $9.7 billion in the first quarter, plus 2.7% from the final three months of 2009, Chrysler said in a statement.

Chrysler reported a net loss of $197 million in the first quarter, compared to a net loss of $2.69 billion in the final three months of last year.

“This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable,” said Sergio Marchionne, Chief Executive, Officer, Chrysler Group LLC, who also has his hands full as head of loss making  Fiat. (€21 million loss vs. €411 million loss for Q1 2009.)

Chrysler said it lost $3.8 billion on revenue of $17.7 billion after its emergence from bankruptcy last June 10 and through the end of 2009. This staggering  number includes $1.4 billion in so-called goodwill, which is posted on the positive side of the ledger, one of those intangible calls by accountants.

It was during the reorganization that Fiat was granted its 20% ownership for a paltry $320 million assigned to its intellectual property in a controversial transaction that saw $15 billion in government support. As a result, Canadian taxpayers now own 2.46% of Chrysler Group. U.S. taxpayers hold 9.85%.

Fiat has the option to increase its stake contingent on government loads being repaid and the  introduction of small car technology, among other terms.

Sales remain problematic at the still struggling automaker

Worldwide vehicle shipments in Q1 were 380,000, which included U.S. vehicle shipments of 268,000, both figures representing an increase of 3% versus Q4 2009. Chrysler Group vehicle sales in the U.S. dropped 5.3% even  though industry sale rose 16% during the first quarter. Market share improved to 9.1% from 8.1% Q4 2009, and to 13.7% Canada from 11.6% percent in Q4 2009.


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