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.
