By on March 26, 2010

Reuters says GM is making a big deal out of sending a $1b check to the U.S. Treasury next Wednesday, “attempting to settle the loan with the government ahead of schedule.”

Who are they kidding? Reuters rightly points out that last November, “GM had said it would begin making quarterly payments in December of $1.2 billion to the U.S. Treasury and the governments of Canada and Ontario.” This coming Wednesday, the quarter is up and it’s time to feed the beast, boys.

GM “was given $50 billion of government financing to restructure in a bankruptcy steered by the U.S. Treasury, which remains a 61 percent owner of GM stock,” as Reuters reminds us. So if they keep up those quarterly payments, it will be 42 quarters, or 10 years, more or less.

Wait, we forgot the interest! Could the green eyeshade contingent please calculate how long it takes to pay off a $50b loan with $1.2 quarterly payments, at a generous prime rate of 3.25 percent?

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23 Comments on “GM, Pay Me My Money Down...”


  • avatar
    Geo. Levecque

    In our Provincial Budget announced yesterday (March 25th) here in Ontario, they said that the Money that Ontario gave to both GM and Chrysler would never be paid back, so how come they are going to pay there USA debt but not Canada eh?

    • 0 avatar
      mikey

      How about 700 Ont. GM workers being called back, Geo?

    • 0 avatar
      mhadi

      how about them? So?

      How about the American workers employed by GM?

    • 0 avatar
      Christy Garwood

      GM is making loan payments to both the US and Ontario governments
      http://media.gm.com/content/media/us/en/news/news_detail.brand_gm.html/content/Pages/news/us/en/2010/Mar/0325_GM_statement
      “In keeping with our commitments to the U.S. and Canadian and Ontario taxpayers, GM plans to make its second quarterly loan payment of approximately $1 billion to the U.S. Treasury and $192 million (USD) to Export Development Canada on March 31.
      While we have more work to do, GM is building high-quality, award-winning vehicles, our direction is clear and our plan is working. Given the progress the company is making, GM has every confidence that the remainder of the loans will be paid in full by June 2010; five years ahead of schedule.”

  • avatar
    cole carrera

    compounded how often?

  • avatar

    Regular compounded interest. Assume $1.2b quarterly payments.

    “If the principal is $50b, and the interest rate is 3.25 percent, how many quarterly payments of $1.2b will it take to pay down the loan?”

    • 0 avatar
      Christy Garwood

      Bertel, only the loan of about $8B is subject to interest. The rest of the $50B is in preferred stock which will be repaid to the respective governments and the UAW VEBA at the time of the IPO or such time as these majority investment holders decide to sell their stock in GM LLC.

  • avatar
    micvog

    Just over 51 payments… or 13 years from the date Government Motors received their bailout.

    EDIT: The Excel formula used was “=NPER(0.0325/4,-1.2,50)”. Since the rate (first term) and payment (second term) are expressed in quarterly terms, the results is the number of quarterly payments (NPER = number of periods). The third term is the loan amount.

    • 0 avatar
      Juniper

      If they can really do that it would be great.
      and they should pay Canada as well.

    • 0 avatar
      mhadi

      They should, but may not. The USA is GMs primary market.

      GM and Chyrlser threatened the Canadians government with pulling out unless they were provided with bailout money, just like they threatened the Swedish and German government.

      Unlike those countires though, the Canadian government(s) caved in like the dimwits they are.

  • avatar
    Quentin

    When you’ve had most of your debt stricken from the record, it isn’t difficult to pay off the small amount you still owe.

  • avatar
    mikey

    As one of many parents that have financed education’s,cars,weddings and picked the tab up for many a resturant/bar bill.

    I made it clear,its a gift, or a loan. Daugter number one owed me a thousand,and made weekly payments. “Weakly” might be a better word.

    “dad,I’ve only got half of payment this week” I heard more than once. “Well” says dad “I guess I’m gonn’a settle for a half of a payment eh”

    I got about $700 back before I wrote the loan off.

    Fact is,as of next week,the taxpayers have some of thier cash back. “Some” being the key word.

    • 0 avatar
      wsn

      mikey, if GM pays back some of its debt, I will be glad. Even if GM doesn’t pay back anything, as long as there no further bailout, I am OK.

      But the thing is, this pay back is more like the neighborhood scoundrel who paid back $1, only to borrow $100 more. Just look at GMAC, they just received several more billions of bailout. And let’s face it, GM wouldn’t be able to sell its junk without GMAC financing.

      Before GM is ready to pay back anything, there should be an official announcement from both GM and the US congress that no more bailouts are need for GM and GMAC.

  • avatar
    porschespeed

    It would appear the smoke machine is being cranked up in
    preparation for the next round of taxpayer fleecing, err, the IPO.

    “Look, we’re paying back the money!”
    “Everything’s ducky!”
    (ignore all the realities)
    “Buy the stock!”

    • 0 avatar
      mikey

      Ok..So the elected governments of two countries and a province,bailed out GM. A good number of taxpayers didn’t agree with the wisdom of such a move.

      However.we elect our government to govern,and they do what they feel is right to do. So I guess we had better suck it up and live with it eh?

      As far I see it, the IPO is a whole different ballgame. If the shares don’t interest you,by all means don’t buy them.

    • 0 avatar
      jkross22

      mikey, stating that we should all suck it up doesn’t address the problem. The auto bailout proved once again that if you’re ‘too big’, there is no accountability for your mistakes, but if you’re Circuit City, Linens n Things and many of the other companies that weren’t in that category, well, that’s just capitalism.

      What hypocrisy.

    • 0 avatar
      porschespeed

      mikey,

      True enough, the deed is done. My concern is all indications are that this is going to play out badly. Again.

      The IPO is done in the next 9 months, on some vague hopes and prayers of future products and profits. Enough small investors are nostalgic/easily mislead and buy the hype. Goldman does the IPO and holds a few shares to give the illusion that big investors are behind GM.

      On the initial short-term rise, the investment bankers get their profits. As the Gov starts to unwind the taxpayer position, the true health of GM becomes undeniable. Again.

      Stock goes back down the toilet. Lotsa small investors who shouldn’t be in the market anyway, lose their ass on GM. Again.

      At this point, there remain two options…
      -We allow GM to finally be liquidated, then useful parts reborn with competent management.
      -Uncle Sugar whips it out, and pisses away more of our borrowed money to feed the zombie.

      I don’t care much for the second option as it doesn’t produce any positive long term results.

      @jkross,

      I’m 100% with you on that. GM and Chryco should have been allowed to fail. But, from a macro-economic perspective, I understand what happened was the easiest solution set. Since there were (and still are) far bigger fish to fry, well, I’m not surprised that what needs to happen, isn’t happening.

  • avatar

    “I thought your policy was ‘Works on Consignment No Money Down”

    No, it is ‘Works on Consigment? No. Money Down!’

  • avatar
    jkross22

    How much are late fees? There’s 3.25% interest and what happens if they’re a day late? AMEX charges $39 and Discover is $49. How much does Uncle Sam charge in late fees? Perhaps they should just use the standard IRS schedule for sending in late tax payments. Seems just, no?

    But then, when does justice enter the discussion where GM is concerned?

    • 0 avatar
      wsn

      LOL, if we go that route, there is no way GM could get a 3.25% loan on a free market. Judging by GM’s bonds before the bankruptcy, they will need to pay much more than 32.5% to borrow any money.

    • 0 avatar
      jkross22

      It would be telling to see what an actual bank would charge GM for a line of credit. Methinks it’s somewhat higher than 3.25%.

  • avatar
    Geo. Levecque

    I agree about the Interest, most people and Corporations too like to forget that fact of life, So GM will stay owe a lot and the 700 or so Jobs recalled here in Ontario won’t matter in the long run, I also agree that the cost of Petrol will be soon heading a way up and yes its too bad they didn’t use this time frame to make a smaller vehicle that would last much longer for the Workers employed in Oshawa and at other Canadian Plants, I wonder what the UAW thinks of this? I don’t think they will think too kindly at this development as they are not employing laid off USA employees!

  • avatar
    george70steven

    While we have more work to do, GM is building high-quality, award-winning vehicles, our direction is clear and our plan is working. Goldman does the IPO and holds a few shares to give the illusion that big investors are behind GM.
    online car insurance quotes


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