Posted by: David Welch on April 20, 2010
GM CEO Ed Whitacre is scheduled to be at the company’s Fairfax, Kan., plant tomorrow to announce that his company has paid the debt portion of the government’s assistance back early. Sources briefed on his plan say that he will announce that GM has paid the remaining $5.8 billion back to the U.S. Treasury Department and Canada and Ontario governments by the time he addresses the press at the plant. It’s a big step, but don’t expect a Lee Iacocca moment.
Back in 1983, Chrysler paid off a $1.5 billion rescue loan—which was backed by the U.S. government—and the company settled the account early. Iacocca made the most of the moment, saying, “We at Chrysler borrow money the old-fashioned way. We pay it back.” That was vintage Lido. He never missed an opportunity to make a sales pitch or take over a room with his personality.
GM’s situation is different. Paying off its government debt early is, no doubt, an impressive feat. But GM’s can’t declare a big victory yet. The government invested about $50 billion in GM. The loan portion from the U.S. and Canada was $8.4 billion. The rest of the investment came in equity. That’s why the U.S. owns 61% of GM. The taxpayers will only get all of their money back once GM launches an initial public stock offering and if the Feds can eventually sell the stock at a price fat enough to recoup the rest of the investment. Whether that happens depends on many factors, like GM’s progress in fixing its woeful European business, how fast the economy and car sales improve and—not to be discounted—fuel prices. If gasoline prices soar, sales of profitable SUVs can take a hit. Crude oil prices are up 81% during the past year.
There’s another reason this won’t be a Iacocca moment. Whitacre is no Iacocca. He was an unqualified success at AT&T and has gotten traction at GM. He is certainly a CEO with some chops. But he is also a man of few words. Whitacre may have starred in GM’s ads, but he does not ham it up for the cameras the way Iacocca did. Besides Bob Lutz, what car executive really does? A source close to Whitacre says his message will be that the loans are paid back in full, with interest and ahead of schedule. That’s Whitacre’s style. Short, to the point and without a lot of ballyhoo. Besides, he can’t go Lido until delivers big profits and a doll of a stock offering.