GM To Repay U.S. Goverment Loans by June 2010

Although various officials had varying viewpoints on the matter, General Motors Chairman and interim CEO Ed Whitacre made it official this morning: GM will repay its government loans entirely by the end of June.

GM presently owes the U.S. Treasury about $6.7 billion dollars. While the automaker has a substantial amount of cash at hand -- approximately $42.6 billion at the end of the third quarter -- it isn’t going to simply pay off the funds all at once. Doing so would eliminate a lot of the liquidity GM needs to maintain day-to-day operations, to say nothing of developing and launching new products.

Instead, GM will pay off the loan with quarterly payments. The first, which totals $1.2 billion, will come by the end of this month. Whitacre mentioned the loan could be repaid even sooner than June, but that could depend on market situations and available liquidity.

What isn’t known is when the new GM will offer its first public stock offering. Former CEO Fritz Henderson and government officials had hoped to push the IPO out by the fourth quarter of 2010, but the company currently “has no timetable” for such a move.

Source: Bloomberg

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