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Led by new CEO Fritz Henderson and new Chairman Ed Whitacre, GM looks to repay the government's loans early -- however the government is still expected to lose $25B USD on its investment, when GM sees its new public offering.  (Source: AFP)

Vehicles like the 2011 Chevy Volt, help GM's chances of staying viable, though, ultimately making the taxpayer sacrafice worth it, according to some.  (Source: Automotive)
GM's repayment plan will kick off in December

Last week it headlines were made when GM's Chairman let slip that the company might soon start repaying taxpayer loans.  At the time, many, including more than a few DailyTech readers, expressed skepticism over whether the company would even try such an accomplishment.  Now, however, the company has announced plans to indeed kick off the repayment -- and to repay the government ahead of schedule.

Firing on all cylinders after selling or killing off its stale assets before its emergence from bankruptcy, a revitalized GM will look to pay off the extra $6.7B USD that the government loaned it during the bankruptcy process.  According to both The Detroit News and The Washington Post, GM's board of directors and the U.S. Treasury have agreed on a repayment plan that would involve GM paying $1B USD per quarter, starting on December 31.

The plan will not include the direct repayment of the approximately $43B USD that the U.S. government gave GM, in exchange for a controlling 60.8 percent stake, or the Canadian government's 11.7 percent stake (for $10.5B USD).  It will, however, ready GM for a public offering in mid-2010 to "repay" the government, and remove this stake.  By then GM hopes to have offload approximately half of its debt.

GM will also pay the Canadian government $200M USD per quarter, to cover the $1.4B USD the Canadians loaned it.  The formula for interest on both the U.S. and Canadian loans is reportedly complicated, with the simplest factor being the minimum rate set at 7 percent.  GM is estimated to pay about $1B USD in interest to the US government.

GM Chairman Edward Whitacre Jr. stated earlier that there was a "sense of urgency at GM to repay the money we owe as soon as possible." He added, "We can pay that back, and I can't tell you when, but it wouldn't be very long and it is sooner than you think."

Between the stake it purchased and the loans, the government has sunk $49.9B USD into GM, with $13.4B USD donated by the Bush administration and the rest coming from the Obama administration.  GM officially does not have to repay the government's loans until July 2015, however, the company feels compelled to do so early to try to convince more customers to buy its cars.

One critical disappointment, according to the Government Accountability Office -- the Congressional Oversight Panel which is overseeing the $700B USD bank and automotive bailout -- is that when GM is publicly offered again, the government (and taxpayers) will likely lose a massive amount of money on their investment.  Current estimates are that taxpayers will lose $25B USD on the investment.

GM's outlook is mixed.  On the one hand it exited from bankruptcy early at 40 days (versus the expected 60-90), benefited from Cash-for-Clunkers, and is eagerly awaiting the release of the highly anticipated 2011 Chevy Volt electric vehicle. 

On the other hand, the company only has $13.4B USD in government funding left.  Ironically GM will likely use much of this funding (which the government provided in exchange for its stake) to repay the loans, in preparation for a public offering to remove the government stake, a curious circular arrangement, that will surely cost taxpayers greatly.  Furthermore, GM faces a $12B USD pension shortfall and the Herculean chore of reversing the trend of $88B USD in losses since 2004.





"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home







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