AUTOMAKERS -- December 15, 2009 at 3:46 PM ET
GM to Repay $6.7 Billion in Bailout Funds, CEO Says
General Motors plans to repay $6.7 billion in federal aid by the end of June, the company's new chief executive officer, Edward E. Whitacre Jr., told reporters Tuesday.
GM owes the U.S. $6.7 billion out of $52 billion in aid it received earlier this year as it navigated through a 40-day bankruptcy restructuring. Of that total, $45.3 billion was converted into equity, giving the government a majority stake in the nation's largest automaker.
While the loans do not mature until July 2015, Whitacre said the company will make quarterly installments starting this month with a $1.2 billion payment. However, he did not say when GM would be ready for an initial public offering of its stock, which would be necessary for the government to recoup the rest of its investment in GM.
Whitacre's announcement comes one day after banking giants Citigroup and Wells Fargo announced they would repay a combined $45 billion in federal aid received under the Troubled Asset Relief Program, and less than a week after Bank of America* paid back its $45 billion in TARP funds.
"Repaying the loans gets them some goodwill and good publicity and also gets them more latitude to operate outside of the government's control," Stephen Spivey, an auto industry analyst at Frost & Sullivan Inc. in San Antonio told Bloomberg News.
Paying back its loans also frees GM from having to comply with government pay restrictions as it searches for a permanent replacement to former CEO Fritz Henderson, who abruptly resigned earlier this month. Whitacre said GM has no candidates yet for a new CEO, and acknowledged pay restrictions have made the search more difficult.
*For the record, Bank of America is a corporate funder of the NewsHour.