How Did GM Pay Off the Loans Early?

Chevy
Following GM’s announcement today that it has repaid the $5.8 billion in U.S. and Canadian loans months ahead of schedule, you may be wondering how exactly the automaker managed this. The answer is a $16.4 billion escrow account set up by the Obama administration during GM’s bankruptcy. Those funds are in exchange for the GM shares that make up part of the government’s stake in the company.

The Treasury Department had to figure out how much of a cushion the company would need after emerging from bankruptcy. The escrow account was set up when the government bought a 61% stake in the company, but there was a string attached: GM had to get the Treasury Department’s OK before spending the money.

Thus far, it used the fund to pay out $2.7 billion for the Delphi bankruptcy resolution and previous loan repayments. Rules required any money left in the account by June 30 to be used for loan repayment. With the loans fully repaid, restrictions on the escrow fund will be lifted and GM will be allowed add the remaining $5.5 billion to its reserves.

So what’s the bottom line?

Essentially, GM no longer needs emergency government aid to stay afloat. While the taxpayer still has a sizable investment wrapped up in the automaker, GM has returned to decent health for the time being.

Q&A: GM Will Add Up to $5.5B in Cash to Coffers (Detroit Free Press)

Comments 

D

I knew there was something fishy about GM repaying the loans so quickly. It is similar to me taking money from a home equity loan to payoff a credit card debt...the debt is still there in the end.

Style

Actually it's more like taking a home equity loan and returning that money after getting a pay raise or paying off your credit card debt or car payment which increases your disposable income.

Bobby Dale Bailey

GM market value was under 500 million in May of 2009. The government has "equity" in escrow of 16.4 billion, now reduced by 5.8 billion.

toney

so do the goverment still have %60 stake in the copany

GollyGoe

"GM no longer needs emergency government aid to stay afloat." LOL. They put some of the billion$$$ of free (stolen) taxpayer money in "escrow" then decided to pay back a taxpayer "loan" by shifting a small portion of it back to the taxpayers. Yeah right, back in health. Hey cars.com blogger guy, give me a million bucks, I'll pay my children enormous salaries with it, and give myself a retention bonus, then I'll give you $100k back and you declare that I'm no longer a deadbeat and a parasite, mkay?

BailoutBenny

What is funny is that they paid off the TARP loan with TARP money so they could go back into debt at 5% interest instead of the original 7%. GM, and the US government, suck. Ron Paul 2012.

Jonathan_Gullible

Um...All they did was refinance their 7% loan for 5% on a $10billion dollar loan to retool, right?
Even Sen. Grassley has called the bluff in a letter to Geitner:

http://74.125.95.132/search?q=cache:jC5a9FZFrhAJ:grassley.senate.gov/about/upload/2010-04-22-Letter-to-Treasury-Department.pdf+grassley+letter+to+geithner&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a

Dabooda

"GM has returned to decent health for the time being." Excuse me? Earning a profit would be a sign of decent health. Refinancing loans with borrowed money is a sign of continuing problems. Oh yes -- and "news" stories like this one are a sign of either brain-death or complicity in fraud.

Geodude

GollyGoe is right

GM is paying back the loan with TARP funds from an escrow account! This is baloney.

GM is paying back taxpayer loans with moar taxpayer dollars. In return, the Department of Energy is giving GM a BIGGER loan at a LOWER interest rate.

So Government Motors uses government money to pay back its government loan so that it can get a bigger, better government loan.

This is a horrible joke. A horrible joke at the expense of the taxpayers.

Bill in StL

Mr. Markley: Did you read the first three paragraphs of your own article before writing the last? How does a company that pays back a small portion of a government handout with another portion, all in hopes of receiving another handout, qualify as being "in good health?"

Is this just a sloppy fluff news piece on a car company, or is there some vested interest you're not disclosing?

Larry

Which of the IDIOTS at cars.com wrote this piece of crap?

GM used money from the government - that is - TAXPAYERS, to "repay" other money it got from the same place.

THEY HAVEN'T REPAID ANYTHING.

It is dimwitted stupidity like this that allows the government to continue the shenanigans that got us into this mess.

Fire the moron who wrote this article.

Samie Mac

Is it 2012 yet?

So Whittaker goes and pays millions (of taxpayer dollars) to make commercials to say that he has repaid taxpayers, when he has just taken another loan from taxpayers and will probably get a bonus from taxpayers because the gov't gave him a contract with taxpayers dollars. Simple accounting to refinance at a lower rate, what a great CEO!

I've got it straight now. More TARP lies, more bailouts lies and of course, more taxpayer dollars for big CEOs, and of course, who knows where the paid back TARP funds go, as in are they dollars that are burned since they were printed, or pay off China debt, since they own most of it? I know, I know, this commercial makes GM look better for buyers of their cars and sets that tone of health for the car industry.

Years of commercials and I don't remember any CEOs bragging about paying off loans, especially when they took out another to pay it off.

Al

NO! DO NOT fire the idiot who wrote this article. He'll end up getting a job with the Obama regime where he can do real damage.

Al

Is it just me? It seems that the auto "journalists" at cars.com and edmunds.com are getting dumber by the day...

Bonk

Wow, the majority of the comments to this article appear to have been written by the same few (or even one) dumb ass using several different names. So pathetic.

the BIG picture

Why does everyone these days feel so cool when they bash an american company. lets stop for a second and think about what GM means to american tire cos, windshield cos, axle cos, paint cos, engine cos, transmission cos, bearing cos, trucking cos, seat cos, rail road jobs, and on and on.
Gm created a lot of jobs and made a ton of money for a lot of decades. and by the way GM and FORD BOTH HAVE MANY MODELS THAT ARE NOW MORE RELIABLE BETTER RATED THAN FOREIGN AUTOS!!!!! check jd power and ass. or consumer reports yourself.
The big three are all in the black as of now. so please buy local support your friends and relatives. any way will make it through.
HOW MUCH TAX REVENUE DO YOU THIINK GM CREATED OVER THE DECADES DUMB F%$?KS!!!!!!!

Troy S.

The Big Picture,

Have you ever stopped to consider not blaming American consumers for American company failures? The companies themselves failed American consumers and in turn, American consumers shopped elsewhere. It seems you're not seeing the big picture.

Jim W.

First off although the arguments for not buying UAW are interesting I will not stop buying from Chrysler till they pull a G.M. or finally go under. As far as GM is concerned it will be a cold day you know where when I buy one of their vehicles. When I was growing up I always wanted a GM pickup especially one of the 80's models but here recently they disgust me. With ads like paying off loans, closing most of their divisions and laying off all kinds of people and using fake safety technologies I really just don't want anything to do with them. I'm almost ashamed to admit they are American. Which brings me to another point they claim to be American but a number of their cars are rebranded Holdens (I know GM owns Holden) and here lately they are bragging about how their German engineering is top notch. Well, GM are you American or something else? Make up your mind already. While it's true Chrysler took a government loan they needed it to stay a float and i applaud Chrysler as they have spent the better part of 30 years just trying to survive. GM though has been spending their time lying to the American people and essentially calling their customer idiots. Maybe they are, GM calls them idiots and they still buy the cars from GM. Who knows.

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