GM Repays Loans...With Borrowed Money

GM sets its metaphorical mortgage on fire! Too bad it used the credit card to do it....

The question of the day seems to be, did GM really repay its loan? Sure, GM's been putting out a LOT of commercial airtime these days suggesting that they did exactly that, but the real deal--according to Senator Charles Grasslee in a piece he wrote for Fox News--is not really as clear-cut as GM suggests.

GM's initial word, that they've been hawking relentlessly over the air, is that they repaid "the taxpayers in full, with interest, ahead of schedule, because more customers are buying (GM) vehicles". But, and this is where things start to get a little trippy--based on Neil Barofsky's testimony before the Senate Finance Committee, GM did repay the loans, but not with earnings. Rather, they repaid the loans with OTHER LOANS, provided at taxpayer expense.

So what does this mean? Well, it basically means that GM's not technically lying but they're being spectacularly disingenuous. They DID pay off that loan, ahead of schedule, and in full. Just like they said. But it's the HOW they did it that should leave everybody thoroughly nonplussed. Barofsky's report details that the source of funds for GM's TARP debt repayments was in fact a "TARP-funded escrow account at Treasury".
Basically, they paid off their mortgage with credit cards and burned the mortgage note at a big barbecue.

So what will this do? Chances are pretty good that this will restore the average person's faith in GM because the average person has not the time nor the training to go digging around in massive SEC filings where all the footnotes and curlicues explain the situation in super-tiny font that a Dilbert strip once named "Enron Beelzebub". But is this a long-term solution for GM? Chances are, no, so they'll likely be needing cash again before too much longer.

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Comments

  • Jerry

    April 28, 2010

    So GM is basically lying about this "repayment". They are in fact repaying a TARP loan with other TARP loans, furnished by the US taxpayers. GM lost something like $3.4 billion last quarter. This hardly puts them in a position to repay anything from profits, as I'm sure they would like everyone to believe. If they are willing to lie about something so easy to check out, I don't believe that I would ever believe anything else they say. I will never own another GM car.

  • SteveAnderson

    April 28, 2010

    Jerry--like I said in the article, they're not REALLY lying. They absolutely did what they said they did. They repaid the TARP loan. But like the Grassley report said, they repaid the loan with an escrow account with other TARP money. So they're not really lying so much as being really really disingenuous.

  • Frank K.

    August 11, 2011

    I have been a GM buyer for many years as is the company I work for with our many company vehicles. I will never buy a new GM vehicle and I will do everything I can to convince corporate to buy Fords for us, all 350 of them. I think we need to buy from a company who is fiscally responsible and did not borrow any money. Ford had the business sense to begin making changes years ago. Kudos to Ford!!

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