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General Motors to start repaying government loans

By Joe Romm  

"General Motors to start repaying government loans"

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Question of the day:  Will GM ultimately pay back all of the taxpayers’ loans?

http://graphics8.nytimes.com/images/2009/08/12/business/12auto01-600.jpg

The NY Times story has one of the true glass-is-half-full headlines of our times:

G.M., Citing Progress, Reports Loss of $1.15 Billion

But these days, you take good news where you can find it, and the rest of the story is certainly a pleasant surprise:

General Motors, whose very survival was in doubt this year, is showing signs of life after its brief tour through bankruptcy this summer.G.M. said Monday that while it was still losing money, it had stabilized enough that it could take an important symbolic step and begin returning some of the $50 billion that the federal government provided to help give it a second chance.

The Obama administration said it was “encouraged” by G.M.’s initial performance since emerging from bankruptcy in July.

Others who had supported a G.M. bailout, despite widespread skepticism that the company’s problems were too big and numerous to fix, said G.M. had taken a big step toward a lasting recovery.

“The company is on its way to fulfilling its promise to American taxpayers,” said Representative John D. Dingell, Democrat of Michigan.

If GM can survive and thrive, it will certainly be one of the great corporate turnarounds of all time — and vindication for the taxpayer-funded bailout.

The company has a very long road ahead, though, and it will have to navigate a future that will increasingly favor more fuel efficient cars, as well as smaller cars and alternative fuel vehicles, particularly those with electric drives, because of a combination of peak oil, Obama’s deal to raise fuel economy standards, and growing domestic and global concern about global warming:

So GM will have to be nimble and profitable in a car market that will become less and less like the one of the last few decades.  Still, GM appears to be turning around even in these tough times:

G.M.’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand “” improvements it owes largely to the bankruptcy process, the helping hand of the federal government and a modest increase in car sales.

Even with that help, the nation’s largest automaker still lost nearly $1.2 billion in the third quarter.

But G.M.’s managers and directors have also made some fast decisions to help the company. They have shaken up the company’s famously bureaucratic culture. And they have used aggressive marketing, including a 60-day money-back guarantee, and some well-received new products, like the Cadillac SRX crossover, to bring shoppers back to showrooms.

As a result, even though G.M. has shed four of its brands, it has managed to hold onto roughly a fifth of the overall car market in the United States. The company is also generating cash now, rather than bleeding it.

That is why the company is in a position to begin paying back $6.7 billion in federal loans as soon as next month. “We think it’s important that we show the taxpayer we can repay this investment,” G.M.’s chief executive, Fritz Henderson, said Monday.

G.M. is still faring poorly compared to its cross-town rival, the Ford Motor Company, which earned a $1-billion profit in the third quarter without the benefit of any government assistance.

So here’s the question of the day:  Will GM make it and pay back all of the taxpayers’ loans?

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6 Responses to General Motors to start repaying government loans

  1. Brewster says:

    If they can market the Volt, and bring along a range of vehicles based on that Voltec Architecture, they just may do it.

    The Volt may be overengineered, especially for a Gen I Plug-In, but if it works they have a big step up on the competition.

    None of the others seem to be the complete car that the Volt is..

  2. WebGuy says:

    Here is our country it is likely that the sells of vehicles will decrease because of increasing gasoline cost…

    Brewster, how can you say that the Volt is complete?

  3. Richard L says:

    It seems contradictory that a company losing $1.2 billion in one quarter can be paying anything back soon. Unless of course they use the money they borrowed already.

    Didn’t Bernie Madoff do something similar?

  4. Planet Money on NPR carried a good interview with an industry analyst on just this question last week. The answer, he said, was that it would need to hold market share and the auto industry would have to go back to selling a lot more cars for it to happen. Unlikely, he thought–and maybe not even great news for the atmosphere?

  5. From Peru says:

    Is’t GM Nationalized?
    So the GM budget isn’t part of the US State Budget?

    GM is still losing. Cash flows in, but overall it loses.It’s smell like a lot of credit titles are around.

    How much money is real and how much is fake wealth, i.e. credits made by corrupt banks?

    What’s all this mess?

  6. Brewster says:

    Web Guy;

    I haved been following the Volt since its inception, and GM has done a remarkable job of anticipating and preparing for future developments.

    The architecture/software seems to be designed to handle everything from a Hydrogen ICE to diesel and perhaps pure battery with little overall change.

    They have spent a great deal of time ensuring that the transition from pure electric to ICE generation while driving is smooth and intuitive.

    Simultaneously, they have sweated the details to make the various subsystems such as A/C, Power steering, etc. are also as efficient as possible.

    It’s a completely thought out electronic car, not just some cobbled together electric pieces attached to old technology. As Joe has mentioned, perhaps it is “over-engineered”, but I think it will pay off for GM in the long run, if they survive other factors.

    I know of no other car, out or proposed, that has had that level of engineering development.