Filed under: Etc., Government/Legal, GM, Earnings/Financials, Tokyo Auto Salon
GM cancels $4.1 billion line of credit
Back in June 2007, GM was staring a lot of financial variables in the face. To help alleviate a potential cash crunch, the General took out a $4.1 billion line of credit with a syndicate of banks to ensure that bills would get paid in the event of an emergency. The UAW negotiations have come and gone, and the Cadillac CTS and Chevy Malibu have launched without the General needing to dip into the credit line, so GM terminated the agreement. The automaker informed the U.S. Securities and Exchange Commission that it had "sufficient liquidity and financial flexibility" in the first half of 2008 to cover its bills without borrowing additional funds.
We won't pretend to know whether GM canceled the credit line because it's starting to see progress in the US, or if the UAW negotiations went better than it thought, or if the Detroit automaker kept the plastic in its wallet this holiday season. We do know, however, that not having to borrow $4.1 billion is probably a good thing.
[Source: Auto News (subs. req'd)]
Reader Comments (Page 1 of 1)
Noidor 6:20PM (1/06/2008)
If that's how they want to spin it, I don't think it's quite the case. My speculation is that due to credit contraction the borrowing terms were probably changed, and GM decided against the use of the credit line, or banks refused to proceed with the lending.
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Tim 9:12PM (1/06/2008)
I agree the interest rate on the loan probably increased to a rate they could not afford.
Tool 7:29PM (1/06/2008)
I recently canceled a $1 billion line of credit. Just didn't want to have that monkey on my back. So I know how GM must feel!
Receipts from my paper route and lemonade stand are way up, eliminating the need for any further capital.
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tankd0g 9:49PM (1/06/2008)
You need an account there to read that article. I wonder how much is was costing them to carry that LOC.
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J.Crew 10:50PM (1/06/2008)
GM was smart to get some back up funds if the UAW was to strike for a longer period and may have also needed some back up credit during the launch of the CTS and Malibu. Since those cars are now flying off the lots and generating cash flow I am sure they got through a potentially dangerous time. Kudos to Rick Wagoner and his team for having a great 2007. Does anyone remember all the fear and negative potential press they had about a year ago this time? They have turned the corner in many areas except a little too many days supply of trucks which they have already announced extended plant shutdowns to correct for this.
On a side note the GM.Next website is pretty cool. website as well.
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Bryan 12:07AM (1/07/2008)
Uh why is it so hard to beleive that they just do not need it? It's not like this is GM 1995 anymore. Get a clue people!
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why not the LS2LS7? 1:06AM (1/07/2008)
Why keep it if you aren't going to use it? It'll just reduce their credit rating. I don't see any reason to think GM canceled this for any reason other than they didn't think they were going to use it.
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Russell 1:17AM (1/07/2008)
When do you cancel your line of credit, only when you've got cash on hand. This, no doubt will raise their credit rating.
Looks like GM stock is the one to watch come 9:30 Monday.
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John 6:14AM (1/07/2008)
I think if the lenders were to pull the plug on the deal, the headlines would be different. I am sure the media would not hesitate to say the lenders were "hinky" about the deal to begin with, just to make GM look bad.
Perhaps, just perhaps GM is making a turnaround?
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dougjp 9:23AM (1/07/2008)
I think everyone so far has missed the point, and its simple.
There are fees for credit lines even when unused. Especially the way US Banks do business. This saves GM money.
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Glenn 3:55PM (1/07/2008)
Great news. Good for them.
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