- The Washington Times - Tuesday, November 17, 2009

General Motors will begin repaying taxpayers’ money next month. @Text.normal:The bailed-out automaker, showing early signs of a turnaround through cost-cutting and improved sales, especially overseas, said Monday it would make a $1.2 billion loan payment in December. Taxpayers have invested $52 billion in GM, most of it in the form of a 61 percent equity stake in the company, the rest through a $6.7 billion loan due in 2015.

The announcement came as GM reported a loss of $1.2 billion in the third quarter, substantially less than in previous quarters, and said it generated $3.3 billion more cash than it spent in the period. In the first quarter, the company burned through $10 billion in cash.

GM said it had $42.6 billion in cash on hand at the end of September.

The automaker did not report second-quarter results as it went through a bankruptcy restructuring beginning in June. Its third-quarter results were calculated from July 10, when it left Chapter 11 protection, through Sept. 30.

“It would have been nice if they were able to report a profit, but I guess that’s unrealistic,” said Jeremy Anwyl, chief executive officer of auto-information site Edmunds.com.

“The big story is that they’ve slashed expenses and they’ve been introducing some strong new products such as the GMC Terrain, the Buick LaCrosse, the Chevy Equinox and the Camaro,” he said.

“I think the most remarkable thing, if you go back three or four years ago, they’ve been bringing out products that have actually been pretty good and it’s very hard to be consistent with product launches,” he said.

GM also saved substantially on interest payments, which were $250 million in the third quarter versus $1.1 billion in the first three months of the year.

Bankruptcy has slashed GM’s debt from $95 billion to $17 billion, said Aaron Bragman, an analyst for IHS Global Insight.

“The revenue has improved thanks to an increased global sales rate, but they’re still reporting a loss for North America,” he said. “They still had a bit of a tough go for sales in the third quarter and that has affected their bottom line.”

Mr. Bragman said an inventory shortage limited GM’s benefit from “cash for clunkers” and that the company “suffered mightily” in the post-clunkers sales hangover.

GM said sales in China rose 6 percent to 478,000 vehicles compared with the second quarter. The company earned $429 million before taxes and interest in Asia and $245 million in Latin America. But it reported pretax losses of $651 million in North America and $437 million in Europe.

“We have significantly more work to do, but today’s results provide evidence of the solid foundation we are building for the new GM,” Chief Executive Officer Frederick A. “Fritz” Henderson said.

Chief Financial Officer Ray Young also said the results mean little because they are not in compliance with U.S. accounting standards. GM is still revaluing assets and liabilities and pension and health care costs, as well as a new United Auto Workers union contract, he said.

GM said it will repay the U.S. loan in two years, with payments every quarter.

It plans to repay the debt over the next eight quarters, but could pay it back as early as next year. But the money will come from funds loaned by the government.

“I think the payback for the loan is, I don’t want to say symbolic, but they’re trying to prove to taxpayers that they get it. This was a singular opportunity to restructure the company and they’re not going to take it for granted,” Mr. Anwyl said.

“They can get a lot of credit from the consumers and taxpayers by paying those back,” he said.

Some analysts said GM was essentially paying the government back with its own money, noting that the loan is being repaid from an escrow account funded by the Treasury Department.

GM spokeswoman Julie Gibson said the company would still be reducing its debt to taxpayers.

“The financing the government provided to GM is greater than the amount that has to be paid back.” she said. “We’re obligated to pay back $6.7 billion. We have a loan agreement and they knew exactly what they would be repaid.”

The escrow fund represents funds left over from Treasury’s debtor-in-possession financing during bankruptcy, she said. Treasury gained part of its ownership stake in GM through that funding.

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