General Motors CEO Ed Whitacre made a big deal this week about GM’s repayment of the $6.7 billion in loans that the company got last year from the U.S. and Canadian governments. (GM press release here.) However, as this article points out, GM still has the $52 billion it got that was classified as equity rather than as debt. That money won’t be repaid unless and until GM does an Initial Public Offering which is large and successful enough to sell the government-owned positions at a price high enough to net $52 billion for the 73% of the stock owned by these two governments. For comparison, the total market capitalization of the Ford Motor Company is $48 billion.
Moreover, this article suggests that even some of the $6.7 billion that was repaid came from other government funds, and hence may have been “an elaborate TARP money shuffle,” in Iowa Senator Chuck Grassley’s words.
(Both links via Evolving Excellence)
Dear Ed Whitacre: You have every right to be proud of GM’s accomplishments in recent months. But you need to remember that the American people are your shareholders–many of us your unwilling shareholders–as well as your prospective customers. You and your company will be best served by a very high degree of honesty and transparency. Explicit acknowledgment of the large outstanding equity position in your press release would have been a good idea.