Saturday, April 24, 2010

About That GM Ad and Payback To Taxpayers

This week General Motors reported that they paid back its TARP money loan of $4.7 billion five years ahead of schedule.
Whitacre added that he was "pleased to announce GM has repaid in full," and with interest, the loans made last July by the U.S. Treasury and Export Development in Canada to help launch the new GM.

Whitacre said the company is about five years ahead of its original loan schedule, given that the automaker is selling the "best" cars and trucks GM has ever produced. Whitacre cited examples such as the soon-to-come Chevy Volt electric car and award-winning 2010 Chevy Malibu.

He added that when GM accepted taxpayer loans, the company promised to restructure the company, reinvest in people and plants and bring "outstanding" vehicles to the market. "We are going to work to make GM a company that we can be proud of again and we are well on our way," Whitacre said.

That's good for what it is, but that isn't the entire story.

The US Government owns more than half of the company because of prior bailouts starting during the Bush Administration that continued into the Obama Administration that top nearly $50 billion. That money is still owed taxpayers, and repayment isn't going to come anytime soon because it would require investors to go and buy out the government share.

In fact, GM still can't exactly turn a profit, so they've paid back the loan with, get this, more loans. Part of the government's bailout package included billions in working capital, and that is apparently the money used by GM to pay off its TARP obligation so that it can obtain still more government loans to retool its factories to meet new tougher CAFE requirements.

The sad thing is that taxpayers remain on the hook but if you buy into Whitacre's spin, you'd think that taxpayers were being made whole. That's the furthest thing from the truth here because the company still can't turn a profit and it is no where near being able to repay its billions in obligations to taxpayers.

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