General Motors has withdrawn a request for $14.4 billion in low-interest loans it was seeking through the Department of Energy, proclaiming it has enough cash to fund the development of battery cars and other high-mileage models.
The news came on the same day the maker said it will speed up the roll-out of its highly-touted Chevrolet Volt plug-in hybrid. The original plan called for GM to provide about 10,000 Volts – recently voted North American Car of the Year – to dealers in select markets this year, then expand nationwide in 2012. GM is now looking to boost production to 25,000 or more in 2011 and to get some of the battery-based vehicles to all its dealers before year’s end.
“We’re confident of our progress and the strong global performance of our company,” GM’s global design director Ed Welburn said during an appearance at the Washington Auto Show.
The decision to withdraw the loan request reflects both the improved cash position of the company – which is expected to report another substantial profit in the coming weeks – and the insistence of senior managers, including CEO Dan Akerson and CFO Chris Liddell, to minimize corporate debt.
The maker is also anxious to shed the unwanted moniker, “Government Motors,” which it got following its 2009 bankruptcy and the subsequent $50 billion federal bailout. GM paid off its remaining government loan last year, while moving ahead on the process of selling off the Treasury’s equity stake. The maker’s November 2010 IPO raised a record $23.1 billion, the vast majority of that going to the U.S. government.
The loan application was designed to help GM fund the costly process of developing more fuel-efficient vehicles. The nation’s Corporate Average Fuel Economy standard will jump from 27.5 mpg to 35.1 mpg by 2016, and government regulators are considering further increases, to as much as 62 miles per gallon by 2025. A formal announcement of the planned revisions is expected by September 1. (For More, Click Here.)
In August 2008, GM initially asked for $10.8 billion, but the loan request was raised to $14.4 billion following the maker’s emergence from Chapter 11 protection – a time when it was unclear it would have the money to move forward on critical product programs.
“I think we’re in a very different position today than we were then,” declared Welburn, during his Washington appearance.
While GM has decided to forego the government loan, cross-town rival Ford has won approval for $5.9 billion from the $25 billion DoE fund. Chrysler is still waiting for approval of its loan application. Other makers who have received funding are Japan’s Nissan, and two California battery-car start-ups, Fisker Automotive an d Tesla Motors.
