General Motors Pays Back $8 Billion to Taxpayers Ahead of Schedule
But how much TARP money has yet to be returned?
April 21, 2010— -- General Motors today $8.1 billion in government loans repaid, five years ahead of schedule and nine months after the troubled auto giant declared bankruptcy, signaling that the auto maker may be on the path to profitability.
"As of today, GM has repaid in full and interest," said GM CEO Ed Whitacre to a crowd assembled on floor of a GM plant in Kansas City, Kan.
To smiles and applause from workers, Whitacre also announced GM's plan to invest $257 million in that plant and another in Detroit to ramp up production of the Chevy Malibu.
Cheering on the floor of a GM factory would have been unthinkable a year ago, when the company was on a downward spiral towards its bankruptcy in June 2009.
When it emerged from restructuring last year, GM had converted most of the $52 billion in federal bailout funds into company stock, leaving a $6.7 billion outstanding loan from the U.S. Treasury. The Canadian government lent the company an additional $1.4 billion.
Benefits of Bankruptcy
With ownership of 61 percent of GM's shares, American taxpayers still have billions invested in the auto maker, but analysts say there's reason to believe that investment could now pay off. If the government can sell its stake in GM for more than $45 billion, then taxpayers could actually make a profit.
"It would look awfully good if the Democrats could say, 'We saved a bunch of jobs, we got a successful company, and they taxpayers got paid back,'" said John Wolkonowicz, a senior analyst at HIS Global Insight. "That would be huge."
Bankruptcy offered GM a chance to shed unprofitable product lines and expensive legacy costs, including large union pensions. Along with a management shakeup that came with the bailout, a line of well-reviewed vehicles is now catching on with the public.
"General Motors has undergone a revolution in top management," said Micheline Maynard, an auto writer for the New York Times. "Because they don't have loyalties to the past, they can go in with fresh ideas."
Although GM still lost $3.4 billion in the fourth quarter of 2009, analysts expect that the company will start turning a profit this year and could follow with a public offering of GM stock.
Administration Officials Praise Turnaround
The Obama administration was already taking credit for the bailout's success today, noting in a report that the turnaround of GM and Chrysler saved an estimated 1 million jobs from elimination last year.
"This turnaround wasn't an accident of history," wrote White House economic adviser Larry Summers on the White House Web page. "It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler -- and indeed the auto industry -- a lifeline."
Treasury Secretary Tim Geithner echoed Summers, saying in a statement: "This continued progress is a positive sign for our auto investment -- not only more funds recovered for the taxpayer but also countless jobs saved and the successful stabilization of a vital industry for our country."
Billions in Bailout Funds Still Owed to Taxpayers
Despite the billions paid back by GM today, there are billions more bailout dollars still outstanding.
Of the $14 billion given to Chrysler, just $1.8 billion has been returned. Economists say that Chrysler was in a deeper hole than GM, but there's still a chance that taxpayers will get their money back.
Then, of course, there are the banks.
Taxpayers spent $205 billion to save the banks, and $136 billion has already been paid back. That leaves a $67 billion IOU from Wall Street to the federal government.
Citigroup, which received $45 billion, is the only major bank that has yet to pay back all of its TARP loan. Citi has so far repaid $20 billion and still owes another $25 billion.
Economist Mark Zandi of Moody's Economy.com said taxpayers will get their money back from the banks, but it will take time.
"I think a year from now, certainly two years from now, everyone will have paid us back what they owed us," Zandi said.
As for insurance giant AIG, which received $70 billion straight? Tax payers are still waiting for that money to be returned.
The Associated Press and Reuters contributed to this report.