GM to pay off government debt. Will it be Ed's Lido moment?

Posted by: David Welch on April 20, 2010

Ed Whitacre.jpg


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.

Reader Comments

Jerdawge

April 20, 2010 6:56 PM

IT's another Mad Hatter moment. The government plunks down 50 Billion, and paying back 5 Billion is considered repayment? I'm sure BHO will crow till the cows come home about how this "wise investment" has been justified by GM's payment. Hello? There is a difference of 45 Billion dollars, no matter what you call it. It is Government Motors, and it will continue to cost the taxpayer billions in retirement cost because GM never could face reality and negotiate on the basis of reality.

P. Williams

April 21, 2010 8:48 AM

Actually, this is more like using one credit card to pay off another. GM is using some of the banked U.S. government money (~$13 B)to pay off this $5.8B loan. Better than burning more taxpayer cash but a long way from paying off the loan.

Schmeltz

April 21, 2010 9:35 AM

Well done GM. Paying a loan back in full, with interest, and ahead of schedule is a good thing, and Whitacre and his team should be commended. Some are critical of his low key style, but I think the substance is more important than the show anyhow. If GM continues with the good results, we'll all be better off.

FORD RULES

April 22, 2010 10:29 PM

DOWN WITH GM

Neiderheiser

April 23, 2010 1:30 PM

I have lost faith in my governemnt and GM. 50 billion on loan and 5.8 paid back? Basic math shows that its far from getting paid back. How does a company that's still posting a GIANT loss get cash to pay back the governemt? It's a money shuffle. Just moving it from one pocket to the other. And the incentives that GM offers comes right out of the taxpayers dollars. Is that really fair? No way.

Latto

April 24, 2010 6:10 AM

ED SAYS GM DEBT PAID BACK IN FULL WITH INTEREST ??? HEY, WHAT ABOUT THE OTHER 45.3 B. THAT GM STILL OWES THE GOVERNMENT ?????

Latto

April 24, 2010 6:10 AM

ED SAYS GM DEBT PAID BACK IN FULL WITH INTEREST ??? HEY, WHAT ABOUT THE OTHER 45.3 B. THAT GM STILL OWES THE GOVERNMENT ?????

jordanwho

April 25, 2010 4:39 PM

One reader recently wrote he lost faith in the goverment. Well to that reader, I have lost faith in people. It's funny how people forget a year and some months ago we were on the verge of a finacial meltdown... One handed over to the Goverment due to open checkbook syndrome for the last 8 years... the stockmarket was down from 14000 + to the 6500, trillions waisted, trillions spent... Now everyone is "Concerned" I say to those readers; you're "Hypocrites" take a look at the bounceback, take a look at honesty in the office and understand what propaganda is and how it's used... Sick of Super Hypocrites.....

richard

April 26, 2010 12:35 AM

Hey Schmeltz, P T Barnum conined the phrase about fooling some of the people most of the time.... I rest my case. I'm sure you're "blissful in you ignorance". The problem is I'm losing my hair living among folks like yorself.

Schmeltz

April 28, 2010 8:29 AM

Hi Richard. Sorry to hear about your hair.

Stweart J.

May 11, 2010 1:01 AM

I agree it's nothing to be too excited about yet, but it could certainly have been much worse. At least, GM is making an effort in times when certain CEOs are still cashing big bonuses on taxpayers' money.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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