GM Repays $8.1 Billion in Governmental Loans, Leaving Only $43 Billion in Bailout Money Owed

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Researched by Industrial Info Resources (Sugar Land, Texas)--Throughout the recovery process that began just over a year ago, when General Motors Corporation (GM) (Detroit, Michigan) emerged from bankruptcy protection, the automaker has struggled to develop and implement a concrete recovery plan. There have been leadership changes during this time, and the plan itself has often changed as the automaker has faced slow sales through the tail end of the recession. However, GM is making progress in its recovery efforts. Earlier this week, GM paid back $8.1 billion in loans from the United States and Canadian governments, marking the first major step in the recovery process for the struggling automaker.

The money that has been paid back was the whole of the loans received from the governments during the bailout process. All total, GM received $52 billion in aid from the U.S. government and $9.5 billion in aid from the Canadian government. The U.S. marked $6.7 billion of that as a loan, with the balance being a percentage ownership stake in the automaker. The Canadian government made $1.4 billion in loans to the automaker as well.

Now the tough part of the recovery really begins for GM. While the automaker did manage to repay these loans much earlier than anticipated, they still have to come up with methods of repaying the billions in additional aid, via buying back their own stock back from the governments, over the next few years. A large portion of this could be repaid once GM makes its public stock offering, something the automaker is hoping to be in a position to accomplish by next year, once they have shown a profit, a requirement for making a stock offering.

The U.S. government currently owns a 61% stake in GM, while the Canadian government holds an additional 12%. It will almost certainly be a number of years before either government is totally out of the automobile difference. The goal now for the automaker is to maintain its existing infrastructure while it develops new vehicles, increases sales and regains the trust of the vehicle-purchasing public. During the recession, GM was forced to close 14 of its plants and cut more than 65,000 jobs through layoffs, early retirement offers and buyouts. GM now employs a streamlined 40,000 workers across North America and hopes it is past the days of needing to cut back on its workforce.

GM has lost $88 billion between its last profitable year, 2004, and last year when the automaker went through bankruptcy proceedings. The automaker lost $3.4 billion during the fourth quarter of 2009 and likely will post another loss for the first quarter this year, but it should be smaller. GM saw its sales increase 16.8% during the first quarter this year. However, much of that increase came thanks to a significant rise in rental car and fleet purchases as Toyota Motor Corporation (NYSE:TM) (Tokyo, Japan) went through its very public brake scandal.

Overall, GM is in a much better place than it was a year ago. The company is more streamlined, has repaid a portion of what it owes and appears to have a concrete plan in place to move itself to full recovery. The key will be if the automaker can continue its sales recovery throughout the year and if its new models, like the much-anticipated Chevrolet Volt hybrid electric car, can take off in the coming months. However, the automaker has a history of making poor decisions, a problem that put them in the position they were in a year ago. Hopefully, the new leadership will have a firmer grasp on the reality facing the automaker and can keep them on the straight and narrow, at least until they can show a profit.

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