GM said to finish payments this week to U.S., Canada
Whitacre is also expected to make an announcement about an investment in the Fairfax, Kan., plant.
Photo credit: Bloomberg
DETROIT (Bloomberg) -- General Motors Co. CEO Ed Whitacre intends to announce on Wednesday that GM has repaid the remaining $5.8 billion in loans from the United States and Canada, a person with direct knowledge of the plans said.
Whitacre will be at GM's Fairfax, Kan., assembly plant to disclose the payments, said the person, who asked not to be identified because the details are still private. The U.S. is owed $4.7 billion, and the total is $1.1 billion for the governments of Ontario and Canada, the person said.
Eliminating the government debt shows Detroit-based GM is moving toward a return to independence, said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Mich. The U.S. owns a 61 percent stake after GM received about $50 billion in aid tied to its 2009 bankruptcy.
“It's a big step,” Mikelic said. “I don't think it's the be-all, end-all of their turnaround. But it's a step forward, and you can't deny that they're in better shape if they're able to repay that debt.”
GM received $8.1 billion in loans as part of its government assistance, with the rest in equity. Whitacre, 68, said in December he was starting to pay down the loans and said he would complete the task by the end of June. A GM spokesman, Tom Wilkinson, declined to comment.
GM's payment plan adds to evidence that the auto industry is recovering from the slump in 2009 that dragged U.S. sales to their lowest since 1982. On April 1, GM posted a 21 percent gain in March domestic deliveries, the third increase in a row over a year earlier. U.S. industrywide sales rose for a fifth month.
Whitacre's Kansas appearance includes an announcement for an investment in the Fairfax plant, which builds the Chevrolet Malibu and Buick LaCrosse sedans, the person said. GM will expand the factory and add jobs, the person said, without giving details.
GM probably will keep making the Malibu and LaCrosse at the plant and may add the redesigned Chevrolet Impala sedan there in 2012, said Michael Robinet, vice president of research firm CSM Worldwide.
GM has been adding production as the car market improves and some new models find favor with consumers. First-quarter North American output at GM rose to 667,000 vehicles from 357,000 a year earlier, Robinet said.
Cash flow and profit will improve as GM assembles more autos, said Joe Phillippi, president of consultant AutoTrends Inc. “They got the cost structure down,” Phillippi said. “As they ramp up production it will have an even bigger impact on cash.”
Returning to profit will be vital for GM to sell shares to the public, CFO Chris Liddell said in an April 7 call to discuss results for the fourth quarter, for which the automaker reported a $3.4 billion loss. Liddell didn't give a timetable for an initial public offering.
Until GM completes the repayment and sells stock, it won't be able to shed the “Government Motors” label that some critics have attached to the company, Phillippi said.
“They can trumpet in ads that they paid the government back,” he said.
The repayment was reported earlier today by CNBC.
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