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General Motors Paid Back Bailout Loans in Full

This article was written by in Consumer. 41 comments.


Earlier today, General Motors announced that the company paid $4.7 billion to the U.S. government and $1.1 billion to the Canadian government, fulfilling its obligation agreed to when it received its initial bailout funds. In total, GM received $52 billion from the U.S. government, but only $6.7 billion of this amount was considered a loan. The company already paid back $2 billion, so this $4.7 billion is the last payment.

This doesn’t mean that “Government Motors” is no more. Despite the payback, the government still owns a controlling portion of the restructured GM. The United States will eventually relinquish its ownership, but this will take some time. Even when the new GM completes its initial public offering, the U.S. government will still be an owner for some time.

The CEO of the new GM, Ed Whitacre, wrote an opinion piece for the Wall Street Journal praising his company and its success since bankruptcy, including a feeling of “renewed energy and commitment” and advertisements for more fuel-efficient vehicles, despite losing $4.3 billion in the second half of 2009.

The auto industry may not have fully recovered, but we now be able to realistically consider the auto industry bailout in general. We still may not know exactly what would have happened if the auto industry was allowed to implode, but it would have probably involved significant unemployment and a major redefinition of the global auto industry.

Has temporary government intervention proven to be helpful, or even industry-saving, to General Motors and the other companies receiving public assistance? Should the market have been allowed to reshape itself?

Photo: skiingutah

Published or updated April 21, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 41 comments… read them below or add one }

avatar tom

You know the old adage: “Only time will tell”

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avatar Investor Junkie

I’m glad they’ve done this, but I suspect GM will be back at some point for another loan. This will not be the last time. I for one refuse to ever purchase a GM based upon the way the bond holders got screwed in the bankruptcy. 200+ years of case law went out the window.

I instead just purchased a Hyundai.

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avatar Bryan

If you bought a Hyndai you’ got a car that is about as reliable as a GM. Should have bought a Ford, the best America has to offer!

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avatar me

you do realize that you are part of the problem right?!? bond holders take a risk by purchasing any bond this time it did not work out for them. what choice did GM have what else could they have done. if they completely closed there doors thousands would be out of work. also the US would lose manufacturing vital to an effective war effort and i don’t mean conflicts in the mid east i mean a large war. I know that i would not have the standard of living i do now and i would not have any help paying for college putting me thousands in debt with no job prospects because people are buying foreign goods . good day sir.

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avatar Adora

You should have bought an American Ford, who did not take a bailout!!!

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avatar Scott

Now if the government would only sell off the additional 46 billion in stock buyouts that they gave GM, we’d really be in business. The loans were only a drop in the bucket.

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avatar G

It’s unconscionable to say that GM has “paid back” the government when WE gave them $52 billion and they only paid back $6 billion and change. I guess this is more creative accounting.

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avatar Hay

thats what GM paid back with the money that they get from the part of company that they own. The government is still making money off from the part of the company that they own, so technicaly we’ve got back more than $6 billion bailing out GM.

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avatar JB

People tend to forget this type of thing when it’s convenient for their philosophical or ideological point of view.

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avatar Apex

This post is pretty funny.

To your credit you list the fact that this represents about 13% of the total funds GM received from the government.

But the title and the tone seem to imply that somehow this is an indication of success and we should feel good that they paid it back “in full” (the in full is pretty funny regardless of what was officially labelled a loan).

An incompetent company with unsustainable cost structures caused by a combination of unrealistic union contracts and incompetent management, received 52 billion in bailout funds and was told they only had to pay back 6.7 of it. Unless they give back 52 billion plus interest this is a giant money pit. There is absolutely nothing to celebrate here.

We have to make a decision in this country about what we are going to do with the free market. Either no one is too big to fail, or if certain companies or industries are too critical then we either have to break them up into tiny pieces so that they can’t be too big to fail or regulate the living crap out of them so that they can’t take anything but the most minimal risk drastically limiting their profitability so that they aren’t able to make the stupid decisions that require them to be bailed out. Of course no one would want to get too big under those conditions and that would be fine.

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avatar JB

You should really read Hay’s post: We (the taxpayers) still OWN STOCK in GM and therefore are being paid DIVIDENDS on the stock that we own. In time, the government will have made back the $45.3 B dollars that was used to PURCHASE STOCK in the company and it will be paid back WITH INTEREST!! People REALLY need to get their facts straight and realize that GM isn’t being “GIVEN” anything. They were LOANED a certain amount of money and the government PURCHASED STOCK with the balance of the money issued to GM…EDUCATE YOURSELVES PLEASE…BEFORE you go attacking policies on which it is very clear that you are NOT an authority. I don’t claim to be an authority myself but simple math and ALL the facts combined could solve the majority of this debate.

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avatar Evan

I go back and forth on this issue. I agree with the general feelings that bond holders got screwed! But if ford can be profitable, why can’t gm – and then the gov’t sells of its shares?

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avatar Apex

Maybe they can, that remains to be seen. But one could make the same argument of other companies. If Best Buy can be profitable, why can’t Circuit City.

Even if GM can be long term profitable, Ford is currently worth 25 Billion. You think a coming out of bankruptcy mess like GM and their tarnished reputations is even worth half of what Ford is? Probably not. But lets say they were worth half. The U.S. govt has a 61% stake in a company that would be worth 13 billion. That makes the U.S. govt share worth 7.5 Billion. So 7.5 billion plus the 6.7 billion loan paid back still leaves us 38 Billion short. Even if they were worth as much as Ford which would be an amazing stretch, they would still be 30 Billion short.

It’s a money pit no matter how many ways you re-arrange the numbers.

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avatar Evan

“If Best Buy can be profitable, why can’t Circuit City.”
- May have been if they were ‘saved’ for 18 months and the came out with better people working there

“…38 Billion short…”
The numbers you use are for today. What if they held that 61% until their market cap regained its position over a couple years. I don’t remember the specfics but it could turn into a situation akin to when the airline industries were saved and the gov’t actually made money (hard to imagine imagine that in today’s world lol)

I am not arguing with your general point, I just think that the situatin is very complicated, and like to look at it from a few different positons

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avatar Apex

sure anything is possible, but even if it did turn out that way in the end its still a terrible investment.

First you can justify it after it works out but write it off if it doesn’t. AIG, Fannie, Freddie, etc. Much of that money is gone forever, even if one of them does happen to work out in the end.

Beyond that, are you going to be happy paying 10 times more than market value for an investment and then hopefully in 5 years, it goes up in value 12 fold so you can get your money back with a little interest? That just doesn’t make any sense.

The only justification is it was an investment in American jobs and so they were willing to pay 50 billion for a company worth zero to save some jobs. And then hopefully that company is still worth something later and you can get some of it back. If thats what you are for then you could state that. I don’t personally believe saving those jobs was necessary, or even a good thing to do. In fact I dispute the very notion that most of those jobs would have been lost in the first place. Many of the jobs would have remained anyway, someone would buy the plants and brand of GM and still produce cars, probably with far less people, probably with loses of money and jobs to many suppliers and dealers etc, but thats just getting the company back to efficiency. As it is now, we are a year down the line and they still lost over 4 billion in the last half of last year. I am not impressed with how great the bailout has been “working”

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avatar Bryan

The reason GM failed is because they are busy doing warentee work and paying there workers 70.00 an hr to do it. If they would build a reliable vehical they could cut all that money from waste to profit for one. That is how Ford is making record profits, they build a reliable vehical.

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avatar Adora

The auto industry does not pay their workers 70.00 per hour. My husband was a 37 year ford worker and never received that much money. Get your facts straight before you publish something you don’t know.

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avatar JB

ANY TIME you invest…be it bonds, stocks, etc, you take the risk of losing your money…ANYONE that knows about investments knows this and these people put up their money FULLY KNOWING that there was the potential for a loss. The GOVERNMENT was NOT the one that made the decisions that got GM (and Chrysler) into this mess…THE GREEDY CORPORATE CEOS and other execs did that. So you really cannot blame the GOVERNMENT for the mess that was created. The government did what it was supposed to do…PROTECT THE PEOPLE from CATASTROPHE!!

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avatar Less Gov Please

As long as the government has any controlling interest in any company, I will not buy from them… if I have the choice.

No Government Motor Vehicles in my future.

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avatar libby

What a Hog wash – What about the other $43 Billion GM owes the government and tax payers ? Oh yea, what about all of the individuals that owned GM stock that now have nothing and will never get anything more for that EVER!!!! – I am really suprised that the loss of stock has been washed away by all this happiness…

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avatar JB

HAPPINESS???? NO ONE is ‘HAPPY’ about what’s happened…some are a bit RELIEVED that it didn’t get WORSE but I don’t think ANYONE is ‘HAPPY’ about it!

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avatar Blane

GM is claiming they paid back in full with interest the loans they received?. This is a flat out LIE and I hope someone sues the living hell out of GM for false advertising. The truth is GM received over 50 BILLION dollars in TARP money and has not paid even one fourth of that money. This is not win for GM or Obama, it is simply another lie and propaganda. Maybe they can just forgive the debt and let the tax payer pick up the rest yet again.

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avatar JB

You must be a Republican because what you’re putting forth sure sounds like the pot calling the kettle black as far as the ‘propaganda’ issue goes.

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avatar Luke Landes ♦127,550 (Platinum)

It seems to be a little-known fact that when bailout funds were distributed, not all funds were in the form of loans. Just like when you buy a stock, you are not lending the company money, you’re trading your money for a piece of ownership. The message might have been lost initially. But when the government decides to get out of GM ownership (ie., sell stock), they *should* get more than they paid initially.

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avatar Apex

The govt has a 61% stake. They still need to get 45 Billion to break even. GM would have to be worth 74 billion dollars to get that kind of money out. Ford is currently worth 25 Billion. GM has never been worth 74 Billion in the history of the company even at it’s most profitable and strongest point. Now it’s going to be worth 74 Billion sometime in the next few years as it tries to struggle out of bankruptcy?

So what are you basing your statement on that the govt *should* get more than they paid initially? It would take an absolute miracle for that to happen.

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avatar Gruven

Screw GM and the UAW.

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avatar Randy

I’m interested in any books or articles that explains the comment above “200+ years of case law went out the window.”

I feel like this is true, but have found very little evidence.

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avatar Investor Junkie

Hi Randy,

I don’t have any specific evidence as I am not a lawyer.

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avatar Investor Junkie

I did find this page on the SEC:

http://www.sec.gov/investor/pubs/bankrupt.htm

From all my understanding the unions were not bond holders and were considered #3. Instead the government put them ahead of the bond holders.

If you find anything specific to the GM bankruptcy I would be interested myself.

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avatar Randy

Not sure, but I think the union owned a considerable chunk of shares. As such, they were entitled to a vote on how the bankruptcy was handled. However, I don’t think the other stock holders were consulted and I believe the union was brought in ahead of other stock holders.

I think also the pension fund was backed by stocks. This put the government in a position of a conflict of interest, since the PGBF would have had to step up to the loss.

In the interest of full disclosure, I should point out that I bought 100 shares of GM stock at $10.22 on 08/04/2008. My feeling was that if the government gave them a bail-out in the traditional sense, I would have profited. And if they didn’t bail-out, well a loss of $1022 wouldn’t make me miss any meals.

For the record, I would have opposed a traditional bail-out if I had been given a chance to vote on it. I’ve pretty much remained silent on my opinion of the way the GM bail-out was handled and don’t intend to comment now. But I am interested.

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avatar No Kool Aid Drinking Here

Are you people really that dumb to believe the bs being shoveled here? Ok, so GM made a payment. With TARP money! Do your research. Don’t stick your head in the sand and take this!

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avatar JaBlair

I’d REALLY like to see know the source of your information on what you’re claiming to be ‘fact’ here!!

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avatar Dave

I don`t understand something here. If only Approx 6 Billion was considered a loan, what about the other 46 Billion we gave them? Or did we just “give” it to them?

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avatar JaBlair

It was used to PURCHASE STOCK IN THE COMPANY on which the government will not only receive its PRINCIPAL but INTEREST as well….receiving MORE MONEY BACK than they paid out to begin with. Are you people REALLY that ignorant as to how STOCKS work? If you are, I pity what you’re retirement funds look like.

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avatar jim Halsey

Wow thats the kind of loan I want

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avatar Jack

AND, that ain’t all.GMAC; now called Ally got 3.4B$ to get out of debt, plus GM also got 370M$
to demolish/clear old GM car sites. It never ends.
Ticks me that auto union folks are bloating over GM paying back 6.7B$. Hell what about the rest of the original 52B$???

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avatar JaBlair

The rest of the 52Billion is in the form of STOCK, aka OWNERSHIP, of the company. When that stock is sold, the government should get all of that money back PLUS INTEREST!! You people who shoot off at the mouth without knowing or even trying to investigate the facts really piss me off.

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avatar informed consumer

hey junkie, the south korea economy thanks you…And I’m sure ford appreciates you all for not noticing they got money from the government too.

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avatar JaBlair

Ford NEVER TOOK the bailout money from AIFP. However, it did take a $5.9BILLION LOAN from the government “to retool plants” in several different states and also asked for a “$9Billion line of credit in case the economic situation worsened”!! Those are the facts put out by the DOE!!

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avatar informed consumer

As of December 31, 2012, the Treasury had received over $405 billion in total cash back on TARP investments, equaling nearly 97 percent of the $418 billion disbursed under the program.

This is because of being paid back, as well as the dividends an interest the government was paid because of the INVESTMENTS they made in the companies they bailed out.

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avatar Ray

What this article fails to tell everyone is the Obama administration placed $13.7 Billion in escrow to pay fees for the bankruptcy proceedings and that is what GMC used to pay back the so-called loans. Not much of a pay back when they use tax payer dollars to pay back tax payer loans. Another epic failure of the Obama Administration.

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