GM plans to start govt loan repayment later this year

GM plans to start govt loan repayment later this year

New York: General Motors is planning to start the repayment of a $6.7 billion loan it received from the US government later this year, says a media report.

Attributing to a person familiar with the matter, The Wall Street Journal said, GM plans to begin paying back a $6.7 billion loan it owes to the US government starting late this year, which would put it on track to potentially repay the entire loan by the middle of 2011.

The report said the move could be controversial and risky as the car maker plans to use other money it received from the government to pay back the borrowing.

The daily said that GM’s move, in which it would repay $1 billion per quarter to the Treasury, is likely to be outlined today, when the company reports its earnings for the first time since emerging from bankruptcy.

In addition, the company would also start repaying a $1.4 billion loan to Canada at $200 million per quarter.

According to the publication, GM outperformed financial objectives during its 40-day stay in bankruptcy and in the months since it emerged from Chapter 11 protection in July.

Under the terms of the $50 billion-bailout it received from the Treasury starting last December, GM agreed to repay the government in two forms: a $6.7 billion loan and a 60% equity stake.

The Treasury plans to start selling off the equity stake after GM launches an initial public offering, the report added.

The WSJ report said, under the government agreement GM can use taxpayer money to repay the loan. GM still has $13.4 billion in an escrow account that came from its bailout, or twice the amount it needs to pay back the government back.

Another factor that allowed GM to set up the repayment schedule is the relative health of its parts-supplier base, the report said citing sources.

Because fewer supplier disruptions have occurred in a weak economy than were expected, GM didn’t have to bail out as many of its parts makers as it had planned for.

GM had been planning to go public in late 2010, but the company’s chairman, Edward E Whitacre Jr said last week it is too early to predict the timetable for GM’s return to the stock market.