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.