GM to start repaying debt to U.S.

Although the automaker reported a $1.2 billion loss, GM said results have improved enough that it can start early repayment of loans to U.S. Treasury.

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By Chris Isidore, CNNMoney.com senior writer

GM 2012: Future cars
General Motors recently showed reporters and select members of the public what it plans to build over the next two years.

NEW YORK (CNNMoney.com) -- General Motors said better results will allow it to start repaying government loans sooner than expected, although the company continued to lose money in its first quarter since emerging from bankruptcy.

The automaker said Monday it anticipates paying $1 billion to the U.S. Treasury in December, along with $192 million to the Canadian and Ontario governments.

GM received $6.7 billion in loans from the U.S. Treasury as part of its bankruptcy proceedings, along with help from Canada and Ontario. But this is only a fraction of the $50 billion in help GM received from U.S. taxpayers since the end of 2008.

The U.S. government now owns a majority stake in GM, and it is not clear that taxpayers will ever recover much of that investment.

Despite a recent upturn in auto sales, GM continues to struggle. The company said it lost $1.2 billion between its emergence from bankruptcy on July 10 and the end of the third quarter on Sept. 30.

By way of comparison, two of GM's top rivals -- Ford Motor (F, Fortune 500) and Toyota Motor (TM) -- reported unexpected quarterly profits during the third quarter.

Still, GM's third-quarter loss was smaller than the $2.5 billion the company lost from continuing operations in the third quarter of 2008. But comparisons to last year are difficult since much of what was GM a year ago was shed during the bankruptcy process.

GM president and chief executive officer Fritz Henderson told reporters Monday morning that the results represented "some signs of progress, some signs of stability," but that ultimately they were "not satisfactory."

The company's core North American operations lost $651 million on an operating basis between its emergence from bankruptcy and the end of the quarter. That's far lower than the $2.1 billion in losses that GM originally expected for North America during the quarter when it filed for bankruptcy.

Outside of the U.S., GM's European operations lost $437 million in the period. But GM made $429 million in the Asia Pacific region, and another $245 elsewhere around the world.

GM said third quarter revenue from global auto sales plunged 25% compared to a year earlier, as sales during the first nine days of the period at the old GM along with the remaining days of the quarter at the new post-bankruptcy GM came to about $28 billion.

As sharp a decline as that was, sales were helped by the government's popular Cash for Clunkers program, which boosted demand for four weeks in late July and August. GM said revenue from auto sales in the third quarter were up $4.9 billion, or 21%, from the second quarter.

GM also said that it lost $14.5 billion in the second quarter. The company never disclosed those results until now since GM was in bankruptcy during the second quarter.

Could pay back loans by next June

Henderson said that GM may speed up its plans to pay back the government though, and that it could be done repaying its debt by June of 2010.

The money for the first payment will come from funds the government gave GM to fund its operations through the bankruptcy process. GM now plans to pay back the $6.7 billion in U.S. government loans over a period of two years.

Henderson added that GM, which is now a privately held company, hopes to sell stock to the public again during the second half of 2010. He said, however, that the timing of such an offering will depend on the state of the stock market as well the company's and industry's performance

All four shareholder groups - the U.S. and Canadian governments as well as the United Auto Workers union and the creditors who got stock in return for their GM debt during the bankruptcy process - want to start selling shares as soon as possible in order to generate a return on their investment.

The General Accountability Office recently said it is unlikely that taxpayers will ever recoup all the money it invested in GM, a statement Henderson said he understood.

"It's my mission to disprove the GAO," he said. "In the end it's a question of your outlook on the stock. The value of the stock is driven by how management performs."

The company said it expects industry sales to be down in the fourth quarter from third quarter levels, but that demand should improve in 2010.

Henderson said that he's confident GM will be able to be to break even if U.S. industrywide sales are at a 10 million annual level, and that GM's current forecast is for 2010 sales of between 11 million and 12 million.

Despite the quarterly loss, the company reported cash flow of $3.3 billion since emerging from bankruptcy, a stark difference from how GM burned through cash for most quarters over the past five years.

The increased cash flow left GM with $42.6 billion cash on hand at the end of the quarter, although the company said it will have to use some of that cash in the fourth quarter to repay government loans, make an additional $1 billion in restructuring payments and pay a $2.8 billion settlement related to the end of the bankruptcy at Delphi, its former parts supplier. To top of page

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