By on April 28, 2010

In response to Senator Chuck Grassley’s concern that GM’s claim to have paid back taxpayer loans was misleading, the US Treasury is now saying that it has no problem with The General’s statements. According to the Freep, a Treasury letter to Grassley explains that:

GM’s decision to pay off the loan signaled the automaker did not face “extraordinary expenses,” and that Treasury approved the loan payoff.

“The fact that GM made the determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment and the American people,” said Herbert Allison, assistant Treasury secretary for financial stability.

Strictly speaking, GM’s claim to have paid back all US Government loans is correct. The only issue is that GM’s ad touting the payback makes no reference to the fact that it still owes the Treasury upwards of $40b. If that misleads folks, well, apparently the Treasury Department isn’t going to do anything about it.

And why would they? The better GM does, the better it looks like Treasury has managed the bailout, and GM’s success is undoubtedly tied to its ability to convince Americans that it doesn’t owe them anything, even if it does. The problem for both GM and the White House is that even former GM “ambassadors” are lining up to knock this misleading softball out of the park… and fan the flames of anti-GM sentiment in the process. All of which just increases the likelihood that taxpayers won’t ever be paid back in full.

Wouldn’t it be easier if some high-profile administration official simply acknowledged that GM has along ways to go? Or what about if GM didn’t try to score PR brownie points off this money-shuffle in the first place? At this point the auto bailout can’t be un-done, but it can still be made even more pointless by whipping up opposition with these Treasury-backed half-truths. After all, if you owe someone money but can’t pay them back, the least you could do is be honest about it.

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64 Comments on “Treasury: GM “Payback” Claims Not Misleading...”


  • avatar

    As if they’d say anything different.

    We’re never going to see all the money. Might as well kill the company outright, and let this serve as a lesson for future generations about why the federal government should never stick its runny nose into the free market again.

  • avatar
    Z71_Silvy

    They’re not misleading at all. GM paid back their loans. End of story.

    Would people rather GM rack-up BILLIONS in yearly interest payments on the loan like Ford has???

    • 0 avatar
      JeremyR

      And the $40B they still owe the Treasury?

    • 0 avatar
      Bancho

      Yes, I’d rather they did the hard work to manage their debt like Ford has been doing. Next question?

    • 0 avatar
      EngineeringTheAtom

      Silvy,

      I’d rather they not run themselves so far into the ground that they must be bailed out by a government with record debt. If you can no longer survive in the market, then you shouldn’t be there anymore.

      As a side note: The interest on GM’s loans is still being racked up. But unlike Ford, we’re paying it. It’s going to China for the loans the government borrowed to bail them out.

    • 0 avatar
      Sinistermisterman

      Silvy, GM has not paid back its loans. And it is not the end of the story.
      And yes I would rather GM racked up billions in interest payments because it might just kick start their useless management into understanding that money isn’t free and the US/Canadian tax payer is not a cash cow that can be buggered and then ignored. Yes Ford are going to have a struggle with their loan repayments, but at least they went about getting a majority of their money the old fashioned honest way – by knocking on the door of a bank.
      Honestly I admire your passion for GM cars in all your postings, but that does not excuse you from being blind to the facts.

    • 0 avatar
      bnolt

      Who are these “people” you speak of? I’d rather they pay it back with money they actually *made*. So exactly when should the “people” expect to see that? A snowball in Hell stands a better chance. About the same possibility that I’ll be shopping GM (a Consumer Digests Best Buy!) Only one of these carmakers extracted money from my wallet. Boy, I’m glad I’m getting back a 5 cents on the dollar ‘rebate’ that will be spent before I even see it.

    • 0 avatar
      undrgnd40

      silvy, if i paid off my mortgage with my credit card would i have really paid back my debt?

    • 0 avatar
      NulloModo

      GM has absolutely not repaid its loans. The facts are as plain as day – GM received a lot more money than it has repaid (or plans to repay in the near term), GM isn’t actually using profits to repay even this small fragment of the total taxpayer bailout, but rather worthless equity in a bankrupt company.

      If GM somehow made 50 billion in actual profit, or even revenue, and decided to give the money back I’d be impressed, but as it is the taxpayers have invested 52 billion into GM, so this 6.7 billion barely scratches the surface, and it is being repaid with other loans to boot.

      The term robbing Peter to pay Paul comes to mind.

    • 0 avatar
      gsnfan

      Yes. If they can’t survive without our money, then they shouldn’t build cars.

    • 0 avatar
      MU78

      If Ford pays back its loans with interest and it is their money, yes.

      If the government expects to get paid back, all the money GM received is a loan. Just because some overpaid hack at the Treasury Dept says GM is correct does not make it any more true than saying we’ve always been at war with Eastasia.

    • 0 avatar
      MM

      GM handed in its unused food stamps, that’s all. Didn’t make a dent in the $40B+ ‘investment’ we’ve made, nor does it make the bondholders whole again.

      Over the past 12 months, Ford shareholders, however, have enjoyed one of the market’s sweetest rides in the last five years, and the Fiesta is still 6 months out. Me thinks they’re doing something right.

      Oh — you mention the money Ford accepted (in neighborhood of $4B if memory serves) DoE put in the trough to upgrade its plants. Any chance GM came back to that trough for the ‘hundreds of millions in plant upgrades’ it announced for Fairfax and Bedford?

  • avatar
    Geo. Levecque

    This could only happen in a American Government that is in Hock to China and Japan, the average Joe is really out to “lunch” on things like that imho and as a Foreigner, maybe my comment is out in left field, if so I am sorry if I have offended anyone.

    • 0 avatar
      NulloModo

      China holds a little less than 900 billion worth of US debt. The US GDP is a little over 14 trillion, so, that 900 billion, while still a large sum, isn’t nearly as big as some make it out to be. We could theoretically pay it all off within a year or two if we needed without any huge changes in spending at home.

      The debt to Japan is a non-issue. Japan needs the US economy to stay healthy in order to survive as we are their biggest market for major exports such as cars and electronics. Japan also needs the US for military protection, as Japan and China have had tensions in the past, and the Japanese SDF is a joke as far as world militaries go.

  • avatar
    Daanii2

    Saying GM paid off its loan five years early, with interest, is bullshit. Were GM still a public company, would a securities plaintiffs’ lawyer go after GM for its CEO making a misleading statement? I don’t know, but I would think so.

    Politics and business should not mix. In politics, what you say matters more than what you do. In business, it’s the opposite.

    Whitacre’s statement makes political sense. It makes no business sense. That tells us all we need to know about GM’s future. Unless it sucks at the government teat, it will die.

  • avatar
    EngineeringTheAtom

    They used bailout money to repay bailout money.

    This would be like me saying “I used one credit card to pay off another credit card. Now I’m debt free!”

    I’d be lying if I said that, and GM is lying here. I felt somewhat insulted when I first saw this commercial; like GM was neglecting the fact that 61% of the company is government owned. I don’t think the bank would like it if I claimed I finished paying off my car if I still owed 61% of my loan.

    This just further cements my resolve to never by a GM product again.

  • avatar
    superbadd75

    Yeah, the ads with Ed Whitacre in them touting their payback are maddening. All I can think when I hear them is that anyone who followed the whole GM bailout knows that they got more than $6 billion from the government, and that they’re trying to mislead the public. All that’s going to do is piss people off and turn even more public sentiment against them. They just need to let the bailout talk go, and focus on advertising what they’re doing right with their product.

    • 0 avatar
      Bancho

      The best part of the Ed Whitacre ads is that Howie Long isn’t in them.

      @superbadd75:
      I agree. They have some nice product and more on the way. They should shut the hell up about the bailout and just show product. The main reason Ford doesn’t have to say anything about the bailout is that GM and everyone else is keeping it in the public eye.

  • avatar
    gslippy

    I hope this payback claim comes up in October during the political campaigns. Which bailout supporter will actually stand by it?

    This ad is Newspeak, 1984.

  • avatar
    mdwheary

    Using this logic, I should be able to enclose some Monopoly money inside my 1040 and consider my tax debts paid.

  • avatar
    Monty

    “a Treasury letter to Grassley explains that:

    GM’s decision to pay off the loan signaled the automaker did not face “extraordinary expenses,” and that Treasury approved the loan payoff.

    “The fact that GM made the determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment and the American people,” said Herbert Allison, assistant Treasury secretary for financial stability.”

    Come on, people. If the Treasury says it’s true, well, it must be true. The Treasury wouldn’t lie, would it?

  • avatar
    zigpenguin

    People seem to be confusing debt and equity.

    GM owed the US and Canadian governments around 8 billion dollars in loans and has paid that off. That is what this huge thing is about. Technically, it is correct that they don’t owe the US government anything anymore (strictly speaking).

    Separately, the US Government owns 61% of GM equity. So, when GM goes public, the US Government owns 61% of the new shares automatically without paying another cent. If GM does well, then the US Government will be able to sell those shares and recoup its money. That, however, requires other investors to be interested in buying GM shares.

    That will take a while, but theoretically, it is possible. If GM is never successful enough that the US government can sell, then we lose our money. There are no more direct payments from GM to the US government.

    If I’m wrong on any of this, please correct me.

    • 0 avatar
      MikeAR

      The equity portion of the bailout was sold to the public as an opportunity for the government to get its (our) money back when GM was turned around and profitable in an ipo. GM would go public again and then the government could sell its stake for a profit. GM still owes money that has not been paid back and will never be paid back in full.

      Understand that the government equity would have to be sold to the public at or above a certain price for all the money to be given back. That price is above what GM was worth at its peak when it dominated the industry. Do you ever see them with a 50% market share again? Do you think that they will become the top company in the industry again?

      Anyone who says GM has paid everything back is either a liar or a fool, which is it?

    • 0 avatar
      z4eva

      Agreed: Because debt is either abolished or converted to equity in a bankruptcy, there is no liability on GM’s balance sheet that says “Payable to the US Treasury.”

      So while GM has “paid back” all the liabilities associated with the bailout, it still holds a major morals/ principals debt to the American taxpayer. Basically we purchased a large share of a very bad (from an investment perspective) company. I don’t think any rational investor would have made this investment; it was only the political expediencies of the bailout that made it happen.

    • 0 avatar
      mikey

      Yes sir, your take on the situation is 100% correct. That being stated, the GM bashers/haters at TTAC will ignore the facts. Thier fearless leader used to be the editor /owner of TTAC.

      Since he has moved on, they are like a leaderless pack of dogs. The new editors here, throw them a bone every so often. They bark and howl and make a bunch of noise,but basically thier harmless.

    • 0 avatar
      Jimal

      I didn’t hear anyone saying GM paid back everything. I heard them say they paid back the loans in full, with interest. Like it or not, that is a technically correct statement.

    • 0 avatar
      Monty

      Mikey:

      I would like to think that the majority of Americans and Canadians want GM to survive, heck even thrive and prosper, certainly well enough to retire it’s obligation to both governments at least.

      Many people, though, and I count myself in that number, see this stunt as disingenuous at least, if not duplicitous. It’s not technically a lie; a loan was repaid, but GM used borrowed money to repay other borrowed money. One might consider it a lie, a lie of omission rather than commission, but nonetheless, a lie is still a lie.

      Like it or not, GM opened themselves to more scrutiny and negative opinions by the way they played this PR slant.

    • 0 avatar
      JeremyR

      The fact is that taxpayers have sunk many more billions into GM than what has been paid back. Those investments have taken the form of various debt instruments (loans, equity, whatever).

      While it’s true that the loan portion has been paid back, many taxpayers will not feel that they have been made whole until the entire invested sum is returned.

      A few analogies have been floated, but here’s what I think is a better one.

      I’m a little behind in my bills, so you give me $60K. We call $10K a “loan,” and in consideration of the other $50K, I sign over 70% ownership of my house to you. (Never mind that under current market conditions, the house is almost worthless, and it may never again be worth the $71K it would have to be for your 70% share to be worth the $50K you sunk into it.)

      So now I pay you back the $10K loan. With money I borrowed from your spouse. We’re square now, right? (If the answer is “yes,” I’ve got some investment opportunities for you.)

      Yes, you still own 70% of my house, but I’ll bet you’d still feel like I owe you $50K–maybe the whole $60K.

    • 0 avatar
      Lumbergh21

      Actually, I’d say a closer scenario is that I “sell” 60% of my buggy whip manufacturing businness in Detroit (valued at $5,000 to $10,000) for $50,000 to an “investor” and borrow an additional $10,000 for short term operating expenses. I then take $10,000 of that $50,000 and pay back the unsecured $10,000 loan. I then say that I have paid back my loan, which is true, but don’t I still owe that investor something? What GM is doing is splitting the hair of debt versus loan. They are still in debt to the government, they just don’t have a loan from the governemnt anymore.

  • avatar
    jjster6

    Let me make this simple. GM DOES NOT OWE US TREASURY $40 BILLION. US Treasury gave new GM (the company reorganized under US bankruptcy law) approximately $50 Billion. For that it got a note saying GM owes US Treasury $7 Billion and US Treasury owns 61% of GM. GM paid back the $7 Billion, and now US Treasury can re-coup the remaing $43 Billion when they sell their ownership stake in the company. If they sell it for more the $43 Billion it’s a profit. If they sell it for less, it’s a loss. Let me say it again, GM does not owe US Treasury $40 Billion.

    Here is another simple example. Let’s say I buy a car from you for $1000. I give you $1000 for a car. You do not owe me $1000. If I want my money back, I can sell the car. If I get more than $1000 I made a profit, if I get less I have a loss.

    So why doesn’t the government just sell its stake in GM? It can’t until GM does an initial public offering (IPO) which is a complex procedure, governed by securities laws. GM is working on it but it will take time. And once the IPO is done, the government can’t just immediately sell all its shares. If buyers think the government is desparate to get rid of the shares, the price will go down. And the largest IPO ever done has been about $17 Billion. Right now, no one is sitting around with $43 Billion to buy GM in one lump sum. The sale will come however but it will take time, and probably the governments shares will be sold off in multiple batches over a period of time (maybe years). While it owns GM though it can participate in any dividends the company might pay to shareholders.

    Will US Treasury make or lose money on the deal? No one can say until the sale is complete. Has anything been done wrong? No way, it’s just that deals like this don’t usually happen in public and the public has a hard time understanding them. It’s all on the up and up and US treasury does have the potential to make a big profit.

    • 0 avatar
      mikey

      Gee who da thunk? jjster6 and jimal…. two more voice’s of reason.

    • 0 avatar
      mikey

      Monty

      You would be one of the regulars here, whose opinion I value,there might be a few others, “porchespeed” comes to mind. Even my left wing countryman Psar…..sometimes has an interesting,take on things.

      Anyway,your last paragraph says it all. I believe GM is trying to scoop some of the Ford goodwill. Perhaps it would have worked better,to say “GM is making strides to pay back the government” how would that statement got twisted around?

      The bottom line for me,as a GM hourly retiree,is that the news is a hell’ava lot better than a year ago.

    • 0 avatar
      gslippy

      The problem with the $1000 car purchase logic is that GM’s market cap at the time of bankruptcy was about $1 billion, yet the taxpayers were forced to pay $50 billion for it. This means that GM’s shareholders were saying it was only worth about 2% of what was tossed into the company.

      While the stock may have been undervalued at that point, I have no reason to believe it will jump 50x.

    • 0 avatar
      MikeAR

      Do you understand this simple thing? If there is an ipo will the government sell its stake and take the money. This means that the government will get that money not GM. Therefore GM still owes money to the government.

      Like I said before liar or fool, which is it?

    • 0 avatar
      rodehardputupwet

      I’m a financial dummy but if $43B represents only 61% of the company, then wouldn’t the IPO have to come in at $70.5B (100%) for the taxpayers to just break even?

    • 0 avatar
      MM

      JJster, a lucid and succinct explanation. And completely spot-on.

      The treasury has had some successes in unloading its equity in troubled companies. They’ve parceled out 1.5B shares of Citi, and while it has impacted short-term share price, most analysts feel Citi will go up significantly once the gov’t unloads its remaining 6B shares. At current prices of $4.50, ‘we’ owned $34B of Citi.

      The fact remains, it’s highly unlikely that we’ll get back the +$40B pumped into GM, not to mention the inherited pension liabilities. And the bondholders whom the gov’t told to “**ck off,” well, they’re just screwed.

      Not a GM basher — wish them and theirs well, and would love to see them turn it around. But much more pleased with the cuts/rebuilding Ford has done, on its own. But mad as hell w/UAW, Waggoner, Lutz and the other dolts who led GM, its employees and many of its cities over the cliff, only to be saved themselves by golden parachutes.

  • avatar
    thornmark

    Investigate this
    Share Post Print
    April 28, 2010 Posted by Scott at 6:55 AM

    Last week General Motors chairman and chief executive officer Edward Whitacre took to the pages of the Wall Street Journal to make an important announcement: “The GM bailout: Paid back in full.”. Whitacre asserted that GM had paid back all the funds it borrowed from the United States in full with interest.

    Whitacre omitted two facts that rendered his column highly misleading. They are the kind of omissions that constitute securities fraud when made by a company in connection with the purchase or sale of a security or when a company reports its financial results.

    If any investor bought GM shares based on Whitacre’s column, it appears to me that the investor would have a good claim against GM. The SEC would in any event be warranted in taking a look at Whitacre’s shenanigans on behalf of the company.

    First, Whitacre omitted any mention of the remaining $50 billion or so that the government has sunk in the company’s equity. Second, Whitacre omitted any mention of the source of the funds with which GM “repaid” the loan. According to TARP Special Inspector General Neil Barofsky, the source of the funds in whole or in substantial part was the United States government TARP program, not GM earnings. Shikha Dalmia has much more detail on the misrepresentations permeating Whitacre’s public relations blitz in this Forbes column.
    http://www.forbes.com/2010/04/23/general-motors-economy-bailout-opinions-columnists-shikha-dalmia.html

    Whitacre’s Wall Street Journal column was, in short, a fraud. But it was a fraud of a special kind. It was a fraud committed with the assistance if not the urging of the Obama administration. It was not, in short, the kind of fraud that Michigan Senator Carl Levin or his Democratic counterparts chairing other Senate committees will be holding hearings on any time soon…..
    http://www.powerlineblog.com/archives/2010/04/026175.php

  • avatar

    they haven’t learned, still talking sideways and the goofiest marketing in the industry.

  • avatar
    thornmark

    from the second author:

    Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government’s tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new–and bigger–DOE loan much more feasible.

    In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM’s government debt–not pay it back!
    http://www.forbes.com/2010/04/23/general-motors-economy-bailout-opinions-columnists-shikha-dalmia.html

    • 0 avatar
      mikey

      Correct me if I’m wrong, But have not all the car companies lined up at th D.O.E. trough. Even those that have gladly taken money from Japanese,German,French,and Korean taxpayers?

    • 0 avatar

      mikey, DOE funds are ostensibly about spurring new and more efficient technologies. By comparison, the bailouts were an outright money grab… their sole purpose being to artificially maintain two dying, decaying automakers on life support through one election cycle, perhaps two.

      Not even close to the same thing.

    • 0 avatar
      bnolt

      Despite the PR genius, some of us can still tell the difference between an apple and an orange. The DOE ‘trough’ is a loan, with at least some possibility of being paid back. Personally, I think the loans are a waste of money, but we have to save the planet, don’t we?

      On the other hand, if GM doesn’t start *making* money, the majority of that 50 billion is gone, as in never to be seen again. Even in our wildest dreams, the IPO isn’t going to raise $50b, and whatever is raised will immediately be thrown down the government rathole.

  • avatar

    I dunno, Silvy/Mikey/et al. Seems you’re increasingly in the minority… not just at TTAC, but across the general media as well. Government Motors’ attempted subterfuge has backfired wonderfully.

    Must have been Docherty’s idea.

    Now comes the most interesting part: reaction from the general public, as they slowly but certainly realize efforts to “save” GM through buying its subpar products are against their self-interest. After all, Government Motors has just been caught lying outright to its own customer base, while playing with their tax money. Why shouldn’t they buy a Ford, Toyota or Honda… and get both a better product and better chance they’ll be around in 3 years to support it?

    Like I said… should be VERY interesting.

  • avatar
    DrX

    What never ceases to amaze me is how much time and effort GM will invest in trying to dupe the public and their potential customers. Perhaps they’d be more successful if they put that effort into improving their products and giving their customers a good experience instead of trying to mislead people (We payed back our loans! The Volt’s going to achieve a fuel economy of 235 MPG!…etc).

  • avatar
    Robbie

    Only conclusion possible here: GM is not to be trusted, and is run by obvious crooks – so never buy a car from them.

  • avatar
    TonyJZX

    if a shyster like glenn beck says “you’re a crook”… well geez… that the icing on the cake

    • 0 avatar
      FleetofWheel

      Did Glenn Beck go through a phony bankruptcy and get a ton of govt cash to restructure? GM did, that shysterism.

    • 0 avatar
      Bancho

      Is it ok to dislike Glenn Beck *and* this sham that GM is pulling? If so then put me in that camp.

      tiger260 says it well below. In the end, I end up feeling less positive about GM and their future prospects.

  • avatar
    Mark MacInnis

    @ Jimal:

    “I didn’t hear anyone saying GM paid back everything. I heard them say they paid back the loans in full, with interest. Like it or not, that is a technically correct statement.”

    There is a world of difference between a statement that is technically correct, and a statement that is the truth. The world has gone to hell in a hand basket since the day the leader of the free world stood up and said, “It depends on what the definition of the word “is” is….” Since then, the world has determined it is OKAY to lie and misrepresent, as long as one statements are “technically correct.”

    One last interesting note. When AT&T, John Deere, and Caterpillar TRUTHFULLY state that new health care law will impair their earnings by millions, and book the entry, the Democratic politicians bluster and threaten to call them before congress to investigate….when GM FRAUDULENTLY claims to have paid back their loans….the Democratic Treasury administration yawns.

    Where I come from, they call this Bullsh1t….damned liberal politicians have turned the world upside down. Truth is lies, and lies are truth.

    • 0 avatar
      Lumbergh21

      Bill Clinton was just a symptom of where the world, or at least the US, already was. Legal back flips and hair splitting were already considered a fact of life, Bill Clinton just took the act to a different and bigger stage.

  • avatar
    Tricky Dicky

    Let’s just lay aside all the forensic studies about the meaning of words and legal structures. What was the PURPOSE of Whiteacre’s pronouncements? I think it was to try and make the American public believe that GM was a thriving car company who had fully rebounded from last years Ch.11. Thriving so much it could afford to repay (FIVE YEARS EARLY!!) their government debt. As such, GM is to be considered a reliable and trustworthy company and please go buy one of our cars.

    The actual situation is that GM have continued to lose US Market share and have (probably) not generated sufficient Revenue to repay those pesky government loans. In fact, the way in which those loans were repaid seems to me to be a huge misrepresentation of the reality in GM and simply underlines the fact that they can’t be trusted. I’d go as far as to say they seem to continue to display the same sort of arrogant disregard for their customers as they’ve always done.

  • avatar
    tiger260

    I guess that this argument could run and run. If you really want to believe anything strongly enough you can “interpret” the facts any way you want. There are obviously some staunch GM supporters here who are defending GM’s actions but I find it hard to believe that anybody but the blindly loyal GM fan can really dress this one up in a positive light?
    Some of this comes down to semantics. If you want to argue that strictly speaking GM claims to have paid back the “loan” are correct, then technically that is correct. The government had to cough up in the region of 60 billion to save a non-viable company. It may be true that 50 Bn was officially in return for an equity stake and that only 10 Bn was a “cash loan”. However, anyone who had followed the facts of the matter in the run-up to the bankruptcy and beyond would see clearly enough that the 50 Bn was nothing other than a bail-out. The fact that the government nominally received an equity share in the company is purely political window dressing. If buying an equity stake in the new GM was anything like a real investment then banks or private equity investors would have stepped in and provided that funding.
    The truth is that the government had provided 50 Bn dollars to buy a 61% (?) share in a company that is worth considerably less that that amount. The value of the company would have to increase many times over to make the government’s share worth what they paid for it – and thus (barring some miracle or divine intervention) that part of the loan will realistically never get paid back in full.
    So when Ed Whitacre actually has the cheek to stand up in a TV ad and say that they have paid back the loan in full plus interest, you could be pedantic and say he is not “lying” in the strictest sense – but you know he is being deliberately misleading. He is using weasel words to try and fool the public into associating repayment of the “loan” part with having paid back everything the government gave GM. He knows that the “loan” is only a very small percentage of what the government had to give them to bail them out. His sin is the omission of the obvious and pertinent fact that there is still another 50 Bn which morally they are obliged to try and pay back and the omission of that fact that the repayment was not made out of any money they had earned, but actually out of other government-provided funds.
    He knows he is twisting the facts to trying to present a misleading picture to the general public. It doesn’t do much for his credibility or integrity to stoop this low. Sadly, for GM I don’t think the general public is quite as stupid as them have assumed – and many will see straight through this half-truth. This is especially true given that in the partisan world we live in there are plenty of well-informed commentators who will see this as an opportunity to strike a blow at the government itself, as disappointingly (though not surprisingly I suppose? ) they seem to be complicit in this lame spin attempt. I feel that this PR effort will likely back-fire badly on them.
    Ironically – when I first saw this story developing the immediate though that occurred to me was simply “this is classic “old” GM, nothing has changed there, they are screwed”. I had hoped that – just maybe – with the post-bankruptcy GM things might change if they could free themselves from all the baggage of “old” GM and change the culture inside the company. This latest move by GM tells me that nothing much changed.
    While “loyalty” is generally a worthy enough quality or trait, I also feel see in the GM supporters’ comments the sort of misplaced loyalty and denial that helped sink the old GM in the first place. Prior to the actual bankruptcy it seemed to me that blind defense of GM and failure to accept or admit just how bad things had gotten there – we in themselves major contributors to the inevitable march toward failure. When TTAC and Robert Farago were just pointing out the obvious issues at GM they were labeled “GM-bashers”. Well, the truth is Robert was right on much of what he predicted, and certainly right about the eventual outcome. Once again, now, I see a bit of the same “Baghdad Bob” attitude in GM defenders – and once again it just says “nothing much has changed here”.
    It is hard to conclude anything other than that fact that GM is headed for a long slow decline into obscurity. The only question I have as a tax-payer is just how much more of our money will it suck down with it?

    • 0 avatar
      Daanii2

      Well said, tiger260.

      Were GM still a public company, Ed Whitacre’s statements would be actionable. A securities plaintiffs lawyer would argue that he was deceiving people into thinking that GM was in better shape than it was. And that is exactly what he was trying to do.

      Business and politics don’t mix. In politics, words matter more than facts. In business, the opposite. GM’s new boss is practicing politics, not business. That’s a bad sign.

    • 0 avatar
      Sinistermisterman

      +1

      I always hoped that this would be the beginnings of a ‘new’ GM, but like tiger260 said, the ‘new’ face is slipping, revealing the same old GM that went down the toilet. It’s a real shame.

  • avatar
    FleetofWheel

    GM is just posturing to get more loans. That’s why they are pretending to have paid back the previous loans.

    In the car biz, this is what dealers to to underwater car buyers, roll over the underwater amount into the next car purchase.

  • avatar
    Steven02

    Honestly, the claim isn’t misleading. GM stated they have paid pack the loans. GM didn’t state they have repaid the gov’t everything that they were paid in. The rest of the money that is owed the gov’t is in equity of the company. Whether the amount paid was too much, that is easily debatable.

    On the flip side, the money from the account that was used to pay the loan was going to go towards the loan anyway, if there was anything left in the account on June 30.
    http://blogs.cars.com/kickingtires/2010/04/how-did-gm-pay-off-the-loans-early.html

    GM paying this pack lowers the liability that the Govt had in GM. That is a good thing for the American tax payer.

    • 0 avatar
      undrgnd40

      putting aside the rhetoric about paying back loans or not. most americans never wanted to be put on the hook for GM. Nor do they want to be forced to carry any equity in the company. I do feel bad when working class people lose their jobs because arrogant management assholes run the business in the ground. But we don’t want these kind of interventions to give every company a “too big to fail” permission to be reckless. i am aware that we need a solid middle class to produce stable tax revenues for infrastructure and such. but the bottom line is corporations need to be self sustaning.

    • 0 avatar

      I’m not as quick to absolve the “working class” stiffs at GM of that company’s past sins. One of the reasons GM was at death’s door was due to the absurb level of compensation and pensions demanded by the UAW.

      It’s ultimately GM’s fault for capitulating to union demands, but UAW had to have seen the writing on the wall and yet continued to demand ridiculous amounts of money.

      As a union is made up of its members, they’re to blame here as well. No sympathy.

    • 0 avatar
      Steven02

      undrgnd40,
      What you posted has nothing to do with what I did. I have the same thoughts about many things that you just mentioned. None of that changes the facts about GM paying back the loan. GM owes the gov’t now what any other corporation owes its stock holders.

    • 0 avatar
      undrgnd40

      i hope i didn’t offend. i just responded because you had me thinking about the equity part of the deal rather than the loan part. and no matter what the truth is, now nobody believes them.


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