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GM's loan payment sparks criticism, but boosts the company's image

Posted by: David Welch on May 14, 2010

Surprise, surprise. After all of the nattering by Congressional Republicans and the anti-bailout crowd, General Motors’ image got a nice bump from the April 21 announcement that the company paid off its government loans. Recall that last month GM said they paid off $8.4 billion in loans to the U.S. Treasury and governments of Ontario and Canada. Then Chairman and CEO Ed Whitacre touted the early payoff in some nationally-televised ads.

The news bumped GM’s buzz rating, as measured by YouGov Plc’s BrandIndex. Check out the details in this Bloomberg story. As Republicans like Senator Chuck Grassley and Representative Darrell Issa, raised a stink, GM’s buzz index scores fell a bit. But overall, GM got a nice boost from the whole affair.

What does it all mean? First of all, it shows that the vociferous griping of the anti-bailout, “government motors” crowd doesn’t really resonate with the majority of the public. That group may never buy GM’s cars. It’s an issue the company will have to wrestle with in its marketing efforts. But they really didn’t cut through the perception that GM is slowly, gradually getting back on its feet. Car buyers, for the most part, seem to be more interested in whether GM is showing enough stability to be able to back up its warranties and whether its new cars are appealing than what is said in the commentariat on cable TV news.

Let me make one thing clear. Whitacre’s claim that GM paid its debt back “in full” certainly glossed over the fact that the majority of the government’s $50 billion investment is tied up in the Treasury’s 61% ownership in the company. He neglected to mention that GM won’t be able to pay the remaining $40 billion of the government’s investment until the company launches its planned initial public stock offering, which could happen in the fourth quarter. The $8.4 billion was just the debt portion. The other critical point is that the $50 billion investment in GM was, in retrospect, more than the company needed. The Treasury Department gave GM a big slug of cash in case there was a double dip in the recession or if wary consumers really fled the company’s brands. As the car market got a boost and some of GM’s new models sold well, it was clear that GM didn’t need all of that cash. So GM just paid back the $8.4 billion in debt with government money.

Still, Whitacre didn’t lie, as some critics have suggested. He made a bigger meal of the debt payment than he should have, perhaps. The price? If my inbox full of angry reader mail is any indicator, the crowd that hated the bailout is even more livid. GM will have a much tougher time winning them over. Some of those consumers may be gone for good. But the majority of the public seems unperturbed. Despite all of the criticism, GM’s image appears to be slowly improving.

Reader Comments

Scott Moran

May 14, 2010 12:47 PM

Just wait for the next 18-24 months when GM's flagship brand comes out with all new product aimed at segment buyers and plans their new stock offering. Toyota, Honda, Ford, etc...WATCH OUT!!!! GM is taking back the auto industry!!!


May 14, 2010 12:50 PM

Good to hear that most of the American public is sensible enough to take the loan payback ads for what they were: a sign that things are improving for General Motors. It seems like whether the news is good or bad, anything that GM says will be seized upon as a means to score political points - as long as they are government-owned and maybe even longer. Regardless of your feelings on the auto bailouts/loans/assistance/or whatever you want to call it, the fact that GM did not need all of the money and paid some of it back must certainly be viewed positively. Unless you are delusional enough to hope they fail, taking down with them all of the taxpayer's investment and millions of jobs - just so you can say "I told you so".


May 14, 2010 11:18 PM

DO the numbers
april auto sales
Ford 25%
Chrysler 25%
Toyota 24%
GM 6.4%

Paint a pretty picture but the numbers
tell it all

James Joseph

May 15, 2010 7:57 AM

GM lying? Is that something new?
It's the way this company does business.
Prior to it's bankruptcy filing, Rick Wagoner its CEO at the time, in on record as saying they had 'sufficient liquidity'. He fully expected to receive loans from the Government, after all they gave AIG 180 billion without conditions.
Go back to the humongous loss numbers they were reporting prior to 6/1/2009 while attempting to negotiate with the UAW and creditors. Conflicting loss numbers in the billions, were they due to accounting changes, if so how and when did they become real?

They must of paid 'Moses Lawyers', a fictitious name for their highly paid fees over $700.00 an hour, not fictitious, to part the company into 'old GM' and 'new GM Cos. In doing so they effectively slaughtered their shareholders and bondholders.

Where will the proceeds of the proposed sale of those old brands like Hummer and Saturn go? You would think old GM, after all the liabilities went there and any those brands are attributable to old GM.
No, they will go if they are ever sold to the new GM, gotta get those IPO share numbers up.

What about all those tax loss carry forwards, since they were prior to 6/1/09 you would think Old GM.
10 to 1 says they will go to new GM.

If you are looking for truth in the way this business operates look elsewhere.


May 15, 2010 1:04 PM

Certainly Whitacre lied - afterall, the intent of his statement was to convey the message that GM, not the Federal Government paid off the loans. GM did not use any operating funds that are generated from sale of products or services to pay off any loan. GM to that point had not made a profit. Logic and the truth would support the detractors of Whitacre, not support him.

Second, since GM and Whitacre never stated that the funds for the payment were from Government sources, Whitacre deceived consumers. And since the intention was to paint a positive image of GM, this is fraud. And certainly Whitacre KNEW the funds weren't from GM so he did in fact INTENTIONALLY DISTORT the truth, withheld information, and LIED.

It is unfair to simply paint the detractors of the GM fraudulent claim of paying off the loans as "Congressional Republicans". Party affiliation has nothing to do with being outraged that a company bailed out by the Federal Government has the nerve and audacity to claim what they never did - that was to do like the rest of us - pay off loans through earning money. What GM did was simply to shift the balance of one credit card onto another. The debt amount is still the same and the reality is that GM is obliged to that debt. Saying you paid a credit card off is fooling only yourself, GM.

To date, Whitacre hasn't even had the INTEGRITY to come clean on this and to set the record straight. We can only conclude the intent to defraud and to deceive was the primary motive of GM's action and to earn positive PR by doing nothing in reality. A company that shallow is a company to avoid.

Prince Ray

May 15, 2010 9:53 PM

Once again, GM has proven the Skeptics wrong, and paid back its debt!. The Taxpayers should be rejoicing but as always, the news listens to the complainers who probably complain about their mothers cooking too!. Oh Gee but listen, GM... One of our Trade Schools here in Rosemount, MN revamped a Toyota Prism this past summer and it gets 173 miles to the gallon. So what's stopping you from capitalizing on the homegrown technology and again taking the No. 1 spot in cars, trucks and SUVs?. In case your not listening to your buyers once again, America is fed up with the status quo. Get a move on and make America proud of you again!.

GM Daughter

May 17, 2010 11:09 AM

Longtime rival Toyota's brake problems did GM a HUGE favor. As long as the company keeps it's eye on quality, they will have no problem recovering.


May 17, 2010 12:05 PM

There are 30% of our population that take Fox News as gospel, believe that the first decade of this century was one of massive growth and anything proposed by anyone remotely connected to a democrat is socialistic, communistic, Marxist or...something.

It is those people who would have preferred to see GM (and all its downstream suppliers and related communities) die, taking with it millions of jobs and devastating countless communities across the nation, for they see only unionized evil and nary a bigger picture of anything anywhere.


May 17, 2010 7:18 PM

And the rich get richer! You know it never ceases to amaze me the way these people operate. Pay back a loan with the loan it’s self. Well at lease they didn’t give themselves another fat bonus! I have been a GM guy all my life ever since I started driving 38 years ago. I’ve always thought I should do my part and keep the money in our own country. For the most part I still feel that way. But where is the gov. when the small business man is in trouble. Who helps him when he runs his company into the ground? Certainly not those fat bureaucrats! He’s left to fix the mess himself and if he can’t then c’est la vie. He isn’t standing around with his hand out pleading for a tax-payer hand out! I want to sell MY shares it the Government Motor company(GM). I’m simply fed up with all this BS.
Darren Zahradnik

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