GM Announces Early Debt-Repayment Program

By KBB.com Editors on November 17, 2009 1:10 PM

Although the first -- and admittedly unofficial -- accounting data released by General Motors since it emerged from bankruptcy on July 10 shows that the automaker lost some $1.2 billion during the third quarter of 2009, President and CEO Fritz Henderson has confirmed that GM will commence repaying the $6.7 billion it owes to the U.S. Treasury Department on an accelerated schedule starting in December. At that time, it will pay down $1 billion of that amount and plans to make quarterly payments from then on in anticipation of liquidating the entire debt by the end of 2011. It also will begin repaying the $1.4 billion it owes to Canada during that same period. Under terms of the original loan agreement, GM wasn't required to make any payments until July of 2015. Henderson also indicated that GM would pay off the remaining $200-plus million of the original $900 million it owes to the German government as part of loans that it had extended to Opel. However, the bulk of the $50 billion in funding the U.S. government extended to GM in return for a 61-percent holding in the restructured firm won't be resolved until the automaker is able to issue stock in the new General Motors Company as part an initial public offering, something it still hopes to do by the end of 2010.

While GM's sales are down by 34 percent on the year, the post-bankrupt General Motors Company did enjoy a five-percent gain in October, marking the first year-over-year increase since January 2008. Henderson indicated that the automaker also expects to lose money in the fourth quarter, and that while its worldwide market share had risen from 11.6 to 11.9 percent, its slice of the U.S. auto market remained unchanged at 19.5 percent. However, he added that despite formidable financial challenges that remain, the restructuring has created a genuinely viable organization and the outlook has been bolstered by very positive buyer response to new vehicles like the Buick LaCrosse, Cadillac SRX, Chevy Camaro and Equinox and GMC Terrain. "We have significantly more work to do, but today's results provide evidence of the solid foundation we're building for the new GM. With a healthier balance sheet and a competitive cost structure, our focus is on driving top line performance."

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