GM to repay bailout loan early

By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- General Motors will pay off a $6.7 billion federal loan by June, well ahead of the deadline for the repayment under terms of the bailout, company CEO Ed Whitacre said Tuesday.

Whitacre had said a week ago that GM was looking at making an early payment. The company announced in November that it would make a first payment of $1 billion to the Treasury in December but it could have taken two years to repay the rest of the money.

091201_ed_whitacre.03.jpg
GM CEO Ed Whitacre

But a statement from GM said it now plans to pay back the loan in full "assuming no adverse economic or business conditions."

The company has the loan money sitting in a $17.4 billion escrow account. It has an additional $25 billion in unrestricted cash on its balance sheet as of Sept. 30, according to its most recent financial report.

Despite a $1.2 billion loss in its first quarter since emerging from bankruptcy, company officials have said the company is ahead of plans to return to profitability.

But the loan money is only a fraction of the cash that the federal government gave to GM over the past 12 months to stop it from going out of business. Overall, GM received $50 billion in federal help, with the government receiving $2 billion in preferred stock and 61% of the company's privately held common shares in return for the rest of the money.

Treasury will not be able to recover most of the money it has given the automaker until it has an initial public offering of its shares. Whitacre said the company is too far away from an IPO to have any kind of timetable for an offering as yet.

The company is just the latest company to receive cash from the Troubled Asset Relief Program (TARP) to announce an early repayment to the U.S. Treasury. Banks Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500) have announced plans to repay their loans this month as well.

But the loan repayment by the banks removed federal pay restrictions on its top executives. GM officials say they still don't know if the pay limits will still apply to its executives due to the government's continued ownership stake in the automaker.

Seeking a new CEO

GM is seeking a new CEO. Whitacre, who had joined the company as a non-executive chairman of the board in July, assumed the CEO post on an interim basis when Fritz Henderson resigned under pressure from the board on Dec. 1.

Whitacre said the compensation limits will likely have some impact on the company's search for a new CEO, but he said he didn't think it would stop the company from landing the right candidate.

"I think someone would want to do it more than for the compensation," he said during a meeting with a handful of reporters in Detroit, a recording of which was later provided by GM. "(It is) also about a desire to lead a big company that has a lot of potential out in the future."

Whitacre said the company is not limiting its search to people with CEO experience. He said experience in the auto industry "would be nice but not a requirement," and that the board had no timetable for finding a new CEO.

Whitacre, 78, said he is working about 14 hours a day, five days a week or more. He is living in the Marriott hotel in Detroit, the same building that houses the GM headquarters.

He said at this point he is not being paid as CEO, and when he will be is yet to be determined by the GM board and the Treasury Department.

Whitacre, the retired CEO of AT&T (T, Fortune 500), joined the board as chairman in July and in that role was coming into Detroit one day a week or less. He said he initially turned down even the chairman's job when originally asked by the Treasury Department to head the board because he was enjoying retirement. But he said Treasury persisted, telling him the company and the nation needed someone with his background to oversee GM.

"I've always owned GM products and admired the company," he said. "It's a decision of conscience; if I can help, I'll come do it."

He praised Henderson for leading the company through bankruptcy earlier this year, but said Henderson and the board wanted the company to go in different directions.

Whitacre wouldn't detail areas of disagreement, although later in the interview he confirmed reports that Henderson and the board disagreed on whether to sell its European unit Opel. That sale was called off by the board earlier this fall. But he said there were a lot of issues of disagreement, and suggested part of the disagreement was the timing of some changes within the company.

"There was just a common agreement that what you want to do is not what I want to do," he said.

He said there is one potential buyer for its Swedish unit Saab, and that he has his fingers crossed that a deal can be struck by the end of the month. But he said that, if a deal isn't done by then, GM will close Saab. To top of page

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