GM Repayment: Beyond the Headlines

By Frank Hagan | Related entries in Bailouts

Our auto company GM is “repaying” some of the bailout money early! Or so say the headlines.

But the reality is a little bit different.

Some background, in case you don’t remember all the payments you made to own 61% of GM. The government placed $6.7 billion in a “contingency fund” in case things got worse for the auto maker. Things seem like they aren’t getting worse, so GM will not need the money. As the Washington Post’s “Economy Watch” analyst Frank Ahrens notes:

GM actually said it is going to start giving back $6.7 billion the government placed in an escrow account for the automaker as a contingency, in case things got worse.

That’s part of the $52 billion the government has plowed into GM, which went through a government-backed bankruptcy earlier this year.

Well, things didn’t get worse — so GM said it could start “repaying” the $6.7 billion contingency fund with a $1.2 billion “payment” in December, and add additional “payments” until the total amount is “paid off” over the next eight quarters.

It is still good news. Our Uncle Sam and his Canadian cousins loaned the money with the provision that repayment be by July, 2015. So not using the money earlier is better than not using it later.

The news headlines will still read “repayment!” because the neat little accounting trick is hidden far down on the “Non-GAAP Managerial Results” press release today:

GM plans to repay the United States, Canadian and Ontario government loans in quarterly installments from escrowed funds, beginning next month with an initial $1.2 billion payment to be made in December ($1.0 billion to the UST [US Treasury] and $192 million to the EDC [Export Development Canada]), followed by quarterly payments. Any escrowed funds available as of June 30, 2010 would be used to repay the UST and EDC loans unless the escrowed funds were extended one year by the UST. Any balance of funds would be released to GM after the repayment of the UST and EDC loans.

I’m glad our new car company is so clever. They would make Frank Abagnale, Jr. smile.

Cross-posted to FrankHagan.com


This entry was posted on Monday, November 16th, 2009 and is filed under Bailouts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “GM Repayment: Beyond the Headlines”

  1. frankhagan.com » GM Repayment: Beyond the Headlines Says:

    [...] Cross-posted to Donklephant.com [...]

  2. PunditKix Says:

    Donklephant » GM Repayment: Beyond the Headlines…

    Thank you for submitting this cool story – Trackback from PunditKix…

  3. Bob Homes Says:

    “It is still good news. Our Uncle Sam and his Canadian cousins loaned the money with the provision that repayment be by July, 2015. So not using the money earlier is better than not using it later.”

    Very true. At least they’re being *somewhat* truthful about it and giving some of the money back.

  4. Catherine Mullikin Says:

    ‘GM actually said it is going to start giving back $6.7 billion the government placed in an escrow account for the automaker as a contingency, in case things got worse.

    That’s part of the $52 billion the government has plowed into GM, which went through a government-backed bankruptcy earlier this year.

    Well, things didn’t get worse — so GM said it could start “repaying” the $6.7 billion contingency fund with a $1.2 billion “payment” in December, and add additional “payments” until the total amount is “paid off” over the next eight quarters.’

    Nonsense. The government is playing with our patience.

Leave a Reply


NOTE TO COMMENTERS:


You must ALWAYS fill in the two word CAPTCHA below to submit a comment. And if this is your first time commenting on Donklephant, it will be held in a moderation queue for approval. Please don't resubmit the same comment a couple times. We'll get around to moderating it soon enough.


Also, sometimes even if you've commented before, it may still get placed in a moderation queue and/or sent to the spam folder. If it's just in moderation queue, it'll be published, but it may be deleted if it lands in the spam folder. My apologies if this happens but there are some keywords that push it into the spam folder.


One last note, we will not tolerate comments that disparage people based on age, sex, handicap, race, color, sexual orientation, national origin or ancestry. We reserve the right to delete these comments and ban the people who make them from ever commenting here again.


Thanks for understanding and have a pleasurable commenting experience.


Related Posts: