GM To Begin Repaying $6.7B in U.S. Loans

Automaker Plans to Pay $1.2B in December and May Pay Full Amount by 2011; Posts $1.2B Loss in 3Q

(CBS/ AP)  Last updated at 6:43 p.m. EST

General Motors, its river of red ink stemmed by a trip through bankruptcy court, reported a narrower quarterly loss and said it would start repaying billions of dollars in government loans that helped keep it alive.

GM lost $1.2 billion for the third quarter - far less than the $6 billion it lost in the first three months of the year, before GM was transformed by a stay in Chapter 11. The company credited a sharp reduction in debt and sales of new models.

In what it called a sign of progress, GM also pledged to start paying back $6.7 billion in U.S. loans. But the money will come from a contingency account full of government cash, leading critics to question just how healthy the automaker really is.

In one sign GM is indeed on firmer footing, it took in $3.3 billion more in cash than it spent in the third quarter. In the first quarter, the last one for which it reported results, GM burned through $10 billion in cash.

GM warned it will face other costs that will bring down earnings in the coming months, including restructuring in Europe and as much as $700 million to shutter dealerships. And there are still questions about the strength of the auto market and the economy.

“We're seeing signs of, I won't call it a recovery, but certainly stability,” CEO Fritz Henderson said.

The repayment of government loans will begin with a $1.2 billion installment in December. GM said it plans to repay the debt over the next two years and possibly as early as next year.

That money will come from a $16.4 billion contingency fund set up by the U.S. government in case sales worsened or other problems cropped up. The seemingly circular payment plan was already stirring controversy in Congress.

“What is the logic in repaying government loans with taxpayer dollars?” asked Brooke Buchanan, a spokeswoman for Sen. John McCain, R-Ariz.

Brad Coulter, director of O'Keefe and Associates, a financial consulting firm near Detroit, said using government money to pay off the government debt is partly a public relations move. But it also indicates rising confidence at GM, which may feel it won't need all the contingency money, he said.

And GM did hedge its bets, opting not to repay the whole amount in December so it still has cash if conditions change. Henderson said GM felt it was prudent not to repay the whole amount in one shot.

The government owns 61 percent of the company and has given GM a total of $52 billion in aid, $45.3 billion of which could be repaid when the new GM makes a public stock offering, perhaps as early as next year.

The General Accounting Office, which serves as Congress' auditors, said last week it was doubtful the government would get all its money back. Henderson said that depends on the price of GM stock, which he intends to make valuable by managing the company well.

“It is my mission to disprove the GAO,” Henderson said.

GM said its improved performance was fueled by new products, including the Chevrolet Camaro muscle car and the Chevy Equinox and GMC Terrain midsize crossover vehicles. The company's top sellers through October were the Chevrolet Silverado pickup truck and the Impala, a full-size car.

The host of new vehicles means GM is charging more on average that its competitors - in some cases, a lot more, reports CBS News correspondent Dean Reynolds.

While the car site Edmunds.com says its surveys show an increasing interest in the new models, the same surveys show GM’s pricing may well be discouraging consumers from buying what it’s offering, Reynolds reports.

The automaker was also helped by having been stripped of many of its debt obligations in bankruptcy court. Before Chapter 11, GM was weighed down by a huge debt of almost $95 billion. That has since been cut to $17 billion.

GM paid $250 million in interest for the third quarter, far lower than the $1.1 billion it paid in the first quarter.

GM's global presence also helped - particularly in China, where the emerging middle class is hungry for cars. GM earned $429 million before taxes and interest at its Asia Pacific unit, and $245 million in Latin America. It had lost $651 million before taxes in North America and $437 million in Europe.

Coulter cautioned that losing money in North America is one of the biggest threats to GM's turnaround. “North America has to get back to being profitable for this plan to succeed,” he said.

Henderson wouldn't predict when GM as a whole would become profitable.

GM's shares are no longer listed on the New York Stock Exchange. But the automaker's bonds, which mature in 2033 and will be converted into equity in the new company, jumped $3.75 to $21.25. That was the highest closing price since January.

Third-quarter profits were generally weak across the auto industry, although sales were helped in Europe, China and elsewhere by programs similar to the U.S. government's Cash for Clunkers rebates.

GM's crosstown rival, Ford Motor Co., by far the strongest of the Big Three automakers, reported a $1 billion profit for the quarter. The new CEO of Chrysler said its operations broke even in September, although the company did not release numbers.

Volkswagen AG and Toyota Motor Corp. both reported quarterly profits of around $250 million, while Honda Motor Co. made a $587 million profit.

GM's results can't yet be compared with previous quarters because its accountants are still setting values for its assets and liabilities. Besides unloading all that debt, GM left behind several old factories and some burdensome contracts.

[rbburnerjr2]

Any profits GM makes will come from the bodies of their retirees who will start to die now that they will not have health care starting in 2010.

[2012EOD]

How about this:

Beleaguered US carmaker General Motors has opened a new joint venture manufacturing plant in northeast China which will begin churning out up to 150,000 vehicles annually beginning next year.

This is their 8th plant in China. Anybody have a count of how many they closed in the USA?, betcha it's about the same number...

[2012EOD]

What a joke, they are repaying the loans with cash for clunkers money.

So, we used our tax dollars to loan them money, and they are paying back that loan with our tax dollars.

YES WE CAN!

[Empire-George]

GM To Begin Repaying $6.7B in U.S. Loans

So the Auto bailout was a loan.....interesting....does the local bank that you have your mortgage with, dictate to you how much you can earn ? whether or not you can have a golf outing for your customers ? Do they dictate your bonuses and how much, when you "borrow" money ?

If the answer is no, then what authority does THIS federal government have in dicating policy of those companies who "borrowed" money....since this isn't a taxpayer hand-out, it's a loan.....anyone care to comment ?

[2012EOD]

Da Comrade

[dwilson59]

I would like to buy American but a new Cadillac DTS is 57K after rebates. After 2 years of driving 50k per year the car is worth $7,000.00. Now If I drive a BMW 5 in the same way it will be worth 14k or about 2 times the Value of the Cadillac. This is my biggest problem that I face in looking at an American Made auto.

PS as a second car there is no reason I should have to pay 38k for a loaded Jeep Rubicon!

[djberson]

I don't think that is an accurate estimate of the Cadillac's resale value (although I could be wrong). I bought a 2000 Bonneville SSei in 2005 for 11.5K, had about 130K miles on it but kept it in excellent condition inside and out. It was totalled this year, and insurance valued it at $8,100. It was a 9 year old car, and I think it kept its value very well. I would think a Caddy would have a comparable rate of depreciation, no?

[dwilson59]

Just one question?

If the govt gave GM the money and unions took less and they cut their cost, why is a Cadillac DTS still 57k?

[bubbadubba]

GM makes really good high quality vehicles.
When GM starts to sell the fuel efficient smaller cars and new hybrids, they will do just fine.
I am glad my government saved GM.
I know Toyota is afraid in a few years they will once again drop below GM as the largest auto maker.

[retiredgustav]

Toyota is loosing a lot of money too!

[presjfk]

GM lost a 1.2 billion last quarter and now will repay some of its loan to the government. Sure, why not, that is how the Fed pays it's bills too.

[kbbpll]

GM is also going to take a billion dollars from the government and give us a car that gets 100 mpg. Oh, wait, that was 15 years ago.

[birmingham123]

The government and unions have sunk the once mighty auto industrty in America. The government mandated CAFE standards that cost billions and the unions in their greed forced contracts that couldn't be lived up to and stayed profitable and since that didn't work, we the taxpayer gets stuck paying off both debts so auto employees can continue receiving their pensions, excess salary and benefits.
Vote the tyrannical liberals out of office

[Lawyers-Guns-n-Money-01]

Uhh, CAFE standards had nothing to do with the sinking of the auto industry. They are applied equally across the board to include imports as well. The United States and Canada have the weakest standards among first world nations. However the United States and Canada have the toughest emissions requirements. (I bet you love seing that Indian cry.)

The unions though are another story. Too much influence to the detriment of the industry.

[Harden_Tar]

Paying off a government loan with another government loan and calling that "repaying"? I thought that was a Ponzi scheme.

[jxknowles]

Great news. If the U.S. is ever going to be a player in the global econmy, we have to produce more than McDonald's, tanning salons, and fighter jets. Thanks to the President and the Congress, we've taken great strides to turn around the mess we got ourselves into with Ponzi schemes and bogus IPO scams.

The crybaby whiners will continue to take shots at the recent successes in the markets and retail sales. By the time 2010 mid-terms roll, I'm confident we're going to be far from the economic shambles Bush and the GOP left us in.

[Mortarman-29]

What about the biggest Ponzi Schemes ever...Social Security, Medicare, etc??? When we going to stop those??

[ffoulkes-2009]

So, what exactly has he done to increase industry in this nation? Don't see it myself.

[TheStolenGiraffe]

ONLY A DISILLUSIONED FOOLD CAN LOOK AT A $1.2 BILLION LOSS AS GOOD NEWS...

[stryker54]

Time for GM to go the way of the stagecoach. But we the people, Obama will give them more money to pay their debt and we the taxpayer will foot the bill. Personally I will never buy another GM or Chrysler car. Let them fold and save the country billions. Than the lazy a$$es can have free health care, better yet Obama, why don't you just give all the lazy people 100 grand so they can stay drunk or stoned, it will get you the votes needed for re-election, if they can think to vote.

[TheStolenGiraffe]

FOR THE RECORD OBAMA NEVER GAVE THE CAR COMPANIES ANY MONEY...THOSE BILLS WERE SIGNED BY BUSH.

[a2fly]

Here is your answer to how they can pay of the TARP money.

"It could pay off the full amount by 2011, four years ahead of schedule, but the money will come from funds loaned by the government." In other words, they borrow more money from the government to pay off the old loan. What a load of trash. The Obama way.

[Skirt-Lifter]

New Math! remember that one!

[pws54]

Yeah, the "Bush Way" was a much better approach. A $1 Billion a day
war(s) that got us in this mess to begin with. Besides, Bush was in favor of these bailouts. He "blessed" it before he left office.
You people with short-term/selective memory never cease to amaze me with your one sided views. Obama may not be the final answer, but at least give someone else a decent chance and time for plans to work.
If you have that kind of foresight, why didn't you predict and warn everyone of the mess we're in now?

[Mortarman-29]

We did predict and warn. No one wanted to listen!

[jscott418]

Tell me how GM can start paying back the Government when they are still losing billions? I would like to know their secret? I have plenty of bills and this could be of great help to many who are out of work. If GM can do this I wonder how they ever got into trouble in the first place? I think they just found a less demanding source for loans. Is that not what big business does. Borrows from a cheaper place and pays off higher costing debt? Kind of like taking a lower interests credit card and transfering a higher intersts cards balance.
You don't really get rid of the principal. Just pay less interests?

[Skirt-Lifter]

Tell me how GM can start paying back the Government when they are still losing billions???
____________

Creative Financing. Losing billion or trillions of dollars is the new paradigm of fiscal responsibility.

[Mortarman-29]

Just following the government!

[ffoulkes-2009]

Guess they sold bonds to China.

[dennisall77]

nO MATTER WHAT gm DOES, PEOPLE WILL CRITICIZE... GOP people will find fault just to keep Obama from looking good... their words are cr@p, that is all they are... cr@p... their ONLY mission: destroy Obama, even at the expense of reviving economy, protecting troops, or saving poor and middle class lives by reforming healthcare... all their words are cr@p

[Mortarman-29]

Cant speak for the GOP...but I can for conservatives. We want Obama to succeed in things that actually help America, are Constitutionally permissible, and keep the government out of our business as much as possible.

If Obama would do that, we would be all for him. But, he hasnt been for those things so far. Thus, we must oppose those things that are destroying this country.

[pws54]

dennis, you're exactly right. All the GOP has is criticism. No new ideas. Just tear down other ideas. Unfortunatley, most of their base is so stupid, it has worked in the past. Some are finally catching on so there is a glimmer of hope for the future. If Palin is all they have to offer, then don't bother even holding an election in 2012. Save the $$ and put it towards health care.

[rharrin1]

Cant speak for the GOP...but I can for conservatives.

Are you speaking of the same conservatives that put the idiot in office for eight years along with the religious right wing nuts?

[U_S_Drug_Addict]

What GM needs is an overhaul in management and the board of directors.
"Design and Technology" need to be driving force.
until then ill stick with NISSAN.

[Mortarman-29]

Yeah...start by getting the government out of it.

[U_S_Drug_Addict]

if the government had not bailed these overpriced hunk a crapolas and they would have laid everyone off, you would be one of them teabagged ones crying into a frenzy over lost jobs......
personally i would never have rewarded failure, i would have given $$ to the NISSANS, the TOYOTAs to bring their manufacturing plants
into the US.

[Mortarman-29]

Sorry. I have no problem with businesses failing! I love the free market.

[chevyhotrod]

"if the government had not bailed these overpriced hunk a crapolas"

"over lost jobs"

so are you saying that President Obama bailed out the car companies to save jobs, union jobs?

was this just a pay back job on the Presidents part for union backing in the election?

Pay or play????? The Chicago way??????

[apuan777]

Here is the best example in the world of what happens when you try socialized health care. Seriously, this a car company merely in business to pay its pensions. Even with all the incentives in the world they can't make money. Lose the unions and you might have a shot!