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Speaking at Texas Lutheran University, General Motors (GRM) chairman Edward E. Whitacre Jr. said that the company would be able to pay back all of its government loans -- soon!
"There is a sense of urgency at G.M. to repay the money we owe as soon as possible," Whitacre said. "Can G.M. pay back its loans? You bet. I can't tell you when but it won't be very long and it's sooner than you think."
That would seem to conflict with a GAO report that said taxpayers were "unlikely" to be made whole on their investments in GM or Chrysler. But it doesn't. Here's the thing: To help GM improve its balance sheet, the U.S. government has already agreed to convert all but $6.7 billion of the money it lent GM into equity -- a stake in the business that never has to be paid back. That's what happened to more than $40 billion of the money we've plowed into GM.
So saying "We can pay back all our government loans" is incredibly disingenuous. Imagine if you lent a friend money then said "You know what? Keep it. It's a gift" and the friend went around bragging that he paid back all the money he owed you. That's what's happening here and even if GM does pay back all the loans, taxpayers will still be sitting on a loss of more than 80% of what we plowed into GM, unless something really exciting happens with the equity stake.
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Reader Comments (Page 1 of 1)
11-12-2009 @ 9:38AM
hoopsfan2 said...
I'm not sure I understand. If GM goes public which it says it plans to do and the govt. has equity and if the company continues to do well, make good products and improve market share as it did in October then it would stand to reason the govt. could sell its stock after an ipo, and not only get its money back but get more. Add that to the cash GM would pay back the govt. and it seems to me GM would pay their money back. Either way, it was Whitacre who made the statement and you can't both be right so lets see who is when this plays out. Whoever is wrong should say so.