DETROITâ€”General Motors Co.â€™s CEO said Tuesday that the automaker has repaid the $8.1 billion in loans it received from the U.S. and Canadian governments, a sign that a plan to rebuild the company is working.
GM got a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as it went through bankruptcy protection last year. The U.S. considered as a loan $6.7 billion of the aid, while the Canadian governments held $1.4 billion in loans.
The payments to the U.S. government, made Tuesday, came five years ahead of schedule, and GM CEO Ed Whitacre said they are a sign that the automaker is on its way toward reducing government ownership of the company. The payments on the Canadian loans were also made Tuesday.
GM still owes $45.3 billion to the U.S. and $8.1 billion to Canada, money it received in exchange for large stakes in the company. The U.S. government now owns 61 per cent of the company and Canada owns roughly 12 per cent. GM plans to repay both with a public stock offering, perhaps later this year.
â€œNobody was happy that GM needed government loans â€” not the governments, not the taxpayers and, quite frankly, not the company,â€ Whitacre wrote in an op-ed article that appeared on The Wall Street Journalâ€™s website Tuesday night. â€œWe believe we can best thank the citizens of the U.S. and Canada by making sure that their investments are hard at work every day, building high quality, fuel-efficient vehicles.â€
Whitacre will make the announcement formally on Wednesday morning at the companyâ€™s Fairfax Assembly Plant in Kansas City, Kansas, where he also will announce that GM will invest $257 million in that factory and in the Detroit-Hamtramck plant, both of which will build the next generation of the mid-size Chevrolet Malibu.
He is scheduled to fly to Washington after the announcement, where he will meet with House Speaker Nancy Pelosi and other lawmakers.
The factory investments will not create any new jobs, but will preserve jobs at both plants. The Kansas plant, which employs 3,869 workers, also builds the mid-size Buick LaCrosse luxury sedan. The Detroit-Hamtramck plant, which has 1,048 employees, now builds the Cadillac DTS and Buick Lucerne large sedans and is gearing up to make the Chevrolet Volt rechargeable electric car.
During the financial crisis that led to GM filing for bankruptcy protection last year, the automaker closed 14 factories and shed more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs. The company now employs about 40,000 hourly workers in the U.S.
Preserving jobs at the two GM plants wonâ€™t help the U.S. unemployment picture, but it wonâ€™t make it worse.
Employers nationwide in March added 162,000 jobs, the most in three years. But the pace of the economic recovery and job creation wonâ€™t be robust enough to quickly drive down the unemployment rate. Itâ€™s been stuck at 9.7 per cent for three months, close to its highest levels since the 1980s.
GM had made about $2 billion in loan payments to the U.S. government and $384 million to Canada in December and March, and had promised to repay the full loans by June. But company officials have said its cash flow, mainly from the sales of newer models, has been better than expected, allowing it to make the remaining $5.8 billion in payments early.
Repaying the loans has been a top priority for Whitacre.
GM officials say the companyâ€™s public stock offering will take place when the markets and the company are ready. They will not predict how much of the remaining government debt will be repaid from the stock offering, but said it likely will take years for the governments to divest themselves fully.
The stock offering hinges on GM posting a profit, which Whitacre has said could come this year. GM lost $3.4 billion in the fourth quarter of 2009 on revenues of $32.3 billion.