Money-losing GM to repay aid early, sees 2010 share offering
Posted: 17 November 2009 0027 hrs

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WASHINGTON - General Motors said Monday an improving global auto market will allow the struggling auto giant to repay government loans early and move forward toward a 2010 share offering.

But the automaker that needed massive aid to avert collapse earlier this year also reported a net loss of 1.15 billion dollars in the period since emerging from bankruptcy in July.

The number one US automaker said it is making progress toward reviving its fortunes, although predicted more losses in the coming months.

"The business has performed better than we had expected going into bankruptcy," chief executive Fritz Henderson told a conference call.

GM said it would step up repayments of bailout aid to the US and Canadian governments and pay off all German government assistance by the end of the month.

GM will accelerate the repayments "in light of improving global economic conditions, stabilizing industry sales and its healthier cash position."

GM owes 6.7 billion dollars to the US Treasury and 1.4 billion US dollars to Canada for loans to help the company emerge from bankruptcy as a new entity.

In releasing preliminary financial results, GM said it would come up with 1.2 billion dollars for loan repayment in December followed by quarterly payments.

Henderson said the company plans to repay the US and Canadian loans within two years, and possibly by June 2010 if conditions warrant.

"If the business is in reasonable condition and the funds are there, we could find ourselves fully repaying the loan" by June 2010, he said.

Even with repayment of the loans, GM would remain a ward of the government.

The US government -- which has provided some 50 billion dollars in financing -- received a 60.8 percent stake in the new firm under the bankruptcy restructuring.

Canada, which provided 9.1 billion dollars in loans, has an 11.7 percent stake and a United Auto Workers union retiree healthcare trust fund holds 17.5 percent.

Henderson said the process is beginning for "privatizing the capital structure" of GM, which would mean a share offering that would eventually allow the government to shed its stake.

Henderson said GM is preparing for an IPO by repaying state loans, improving its liquidity and getting its financial report in order for regulators.

"There are a lot of factors suggesting we should be ready to go in the second half," he said.

Asked about a congressional report from the Government Accountability Office (GAO) indicating the US government may never recoup the value of its investment, Henderson said: "It is my mission to disprove the GAO, to create value in the company so that the taxpayers can get value for their investment."

Henderson's comments contrast with those of GM chairman Edward Whitacre, who told the Wall Street Journal last week that a 2010 IPO may be too optimistic.

The automaker said it has begun repaying German state aid for its Opel division and will pay off the remaining 600 million dollars (400 million euros) by the end of the month.

In the unaudited results, a loss of 1.15 billion dollars from July 10 to September 30 was attributed to the "new GM" despite improving market conditions.

GM said it expects "negative net cash flows in the fourth quarter of 2009" due to repayments of government aid and a 2.8-billion-dollar payment to help its former parts unit Delphi emerge from bankruptcy.

But in 2010, the company expects "modest growth" in the global automobile market, including the United States, which will help its financial position.

"We have significantly more work to do, but today's results provide evidence of the solid foundation we're building for the new GM," Henderson said.

GM said its results, which are not in compliance with US accounting standards, showed revenues in the third quarter of 28 billion dollars -- 26.4 billion dollars from the "new GM" and 1.6 billion dollars from the "old GM."

Operating results before interest and taxes for the new GM showed a loss of 261 million dollars.

GM said its global share was 11.9 percent in the third quarter, up 0.3 percentage points from the first half of the year for the old GM. The company's US market share in the third quarter was unchanged at 19.5 percent.

The automaker said it was optimistic because of significant cost cuts, having slashed total structural costs for the past period by 9.1 billion dollars.

- AFP /ls