• Jan 27th 2011 at 7:56PM
  • 16

Today, General Motors basically told the U.S. government: we're doing fine. It did this by withdrawing its $14.4 billion loan request from the Department of Energy (DOE) through the Advanced Technology Vehicles Manufacturing Loan Program (ATVMP). The withdrawl request was conveyed to the DOE this morning.

The president of GM North America, Mark Reuss, was trapped in Detroit thanks to a big snowstorm, so Ed Welburn, the vice president of GM Design North America, stepped in to deliver the keynote address at the DC Auto Show. Afterwards, we asked him to explain why GM has cancelled the loan request. He said it wasn't because of the delay the program is experiencing. He said:

We don't want to have those kinds of debts to deal with. I think it says a lot about the financial health of the company. We will not back off on the work that we're doing, the development of technologies, the development of new vehicles. In fact, if anything, that is accelerated.

If GM is against big debts now, why did it apply for the loans in the first place? Welburn said, "We're in a very different position today than we were then." GM's Greg Martin told AutoblogGreen that asking for the loan was, "the only viable option as the time." Martin added that the DOE did not give any guidance about withdrawing the loan.

dc auto showThe old GM asked for a $10.4 billion loan in the fall of 2008 and the new GM re-submitted a $14.4 billion request in late 2009 (which supplanted the first request). We'll never know how much GM could have received, since one of GM's competitors, Ford, asked for $11 billion but only got $5.9 billion. Now that GM won't take (more) government money, does that give the company a marketing advantage compared to Ford? "I would certainly say that the American public would feel better about [us not taking the loan]," Welburn said.



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  • 16 Comments
      • 4 Years Ago
      he glut of articles that came out this week about how GM & Chrysler had "Fixed" the ATVM loan for themselves seems to have put too much scrutiny on GM and further review would have tracked back to the dirty-secrets of who they bribed in Washington to get a private slush fund just for themselves at taxpayer and competitor expense. Nissan caught them and so they got some of the money too, making it Slush money AND Hush Money. No company would walk away from $14B that they are a shoe-in for unless they realized that deeper investigations would bring them to their knees and link all of the payoffs and "special dinners" together. Rattner, the guy at the White House who ran the car money is now facing criminal charges. The DOE staff that worked on it have been fired or “forcibly migrated” and all are under investigation by the Republicans who hated the Detroit deals and law enforcement. The big crime is all coming apart at the seams. You-know-what rolls downhill and Rattner started the heap unraveling.

      FROM THE TRUTH ABOUT CARS:

      The Department of Energy’s $25b Advanced Technology Vehicle Manufacturing Loan program was very nearly used as a slush fund to keep GM and Chrysler afloat during the dangerous days leading up to the federal auto bailout. Though President Bush’s decision to use TARP to rescue America’s failing automakers took away the need to tap the so-called “retooling loan” program to fund America’s auto bailout, that decision also contributed to a long delay in the allocation of the ATVM loans. Because the loans require applicants prove “financial viability,” GM and Chrysler’s requests (which account for $17.4b out of the remaining pool of $16.7b in non-allocated loans) have been on hold, and with them, every other automaker still seeking approval for its requests. And now, with no word from the DOE on the loan program since last April, congress is agitating for the DOE to make with the loans already. Senator Diane Feinstein captures the frustration in a letter published by the Detroit News

      “On multiple occasions, the department has missed internal deadlines for initial decisions, term negotiations, final decisions and loan closure,” she wrote, saying the department failed to give applicants “a clear timeline.”

      But did the DOE miss deadlines and string automakers along out of negligence, or because it had to wait in order to fulfill the loan program’s mission, namely supporting the bailed-out automakers?


      This question doesn’t have an easy answer: after all, few in the private sector expect rapid action from governmental bureaucracies. The slow allocation of federal loans really shouldn’t come as a surprise to anyone. At the same time, the ATVM program has been in place since 2008, and automakers like Ford, Nissan, Tesla and Fisker have jointly received some $8.3b for programs ranging from Tesla and Fisker’s EV luxury car projects to Nissan’s Leaf and more fuel-efficient versions of Ford’s mass-market models. If the DOE could approve billions for non-bailed-out automakers, surely there is nothing out of the ordinary going on with the DOE’s bureaucracy. Curious minds must, therefore, look to pending requests for an explanation of their delay.

      And those requests tell an interesting story. With $8.3b of the program’s loans already spent, GM’s $14.4b request would, if approved, soak up nearly all remaining funds. In response to both this reality and Fiat’s changes to Chrysler’s efficiency priorities, the Pentastar has reduced its loan request from $8.55b to “around $3b.” Had Chrysler not made its request reduction, the two bailed-out automakers would have accounted for all but $1b of the retooling loan program’s funds. Even with that reduction, Chrysler and GM’s outstanding requests amount to some $700m more than the program has left to give out… and that’s not counting the smaller firms still hoping for a piece of the pie, including ZAP, ALTe, Aptera, Coda and more. Or the fact that

      because the costs have been higher than expected, the Energy Department won’t be able to loan the entire $25 billion, Sen. Debbie Stabenow, D-Lansing, said. Auto executives say the agency may only be able to loan another $10 billion.

      The fact that GM and Chrysler are requesting every remaining penny in the ATVM program, co
        • 4 Years Ago
        You really shouldn't post so much text from another website, it's copyright infringement. You're taking away their revenue.

        Fixed the loans for themselves?

        Ford got most of the money from the ATVM program. And they used it to make new crossover vehicles! So trying to make a big deal out of how GM and Chrysler want money too is bizarre. Why wouldn't the 3 largest automakers in the US get the bulk of the loans? Especially after Ford set the precedent?
      • 4 Years Ago
      It doesn't matter who got a loan or not. This is not free money and has to be repaid. What matters is that GM is no longer bankrupt, is public again and building cars (like the Volt) that people want.

      By the way, this is done all over the world. The Canadian, Brazilian, French and Japanese governments all help their big aviation, automotive and aerospace companies because they contribute so many jobs to their respective economies.

      Britain is SOL right now because they refused to help their auto companies when they were in trouble. Now they depend on foreign automakers for ownership and jobs. Sad.



      • 4 Years Ago
      I don't think this gives GM a marketing advantage over Ford.

      GM still took a lot of government money, so they can't afford to throw stones.

      Furthermore, the big 3 haven't slung mud over this. It's not like Ford is running ads saying "GM took more money than us" or even "we did it all on our own".
        • 4 Years Ago
        Pssst: I hope you know that Ford also took LOANS from the US government.
      • 4 Years Ago
      BS. I'm fairly sure the real reason they withdrew the application was
      - They were asked to withdraw or
      - They were told they won't get it or
      - They didn't want some more public anger or remind them about the bailout

      Ofcourse, with banks, it doesn't matter since all the subsidies (like 0% interest loans) is done behind the curtains and nobody knows since journalists who can talk about it and make the people aware don't understand that kind of banking.
        • 4 Years Ago
        why not-

        It abosolutely means something. To quote you it means that not getting the loan is officially a "bad outcome". Prospectuses contain forward-looking statements, which rely on certain assumptions. The possibility that some of those assumptions will not come to pass in the way they projected is stated in the "Risk Factors" section. Since one of those "bad outcomes" happened, the forward-looking statements need to be revised accordingly.

        GM not getting the loan is "bad outcome"... this statement to try to make it look otherwise is just spin. How this will affect future plans remains to be seen.
        • 4 Years Ago
        line937s:
        That statement in their IPO means nothing. Every company has to list every possible bad outcome in that section.
        • 4 Years Ago
        This is totally spin. GM was planning on getting this money, and its financial projections factored it in, which will need to be revised down now. This loan involves favorable terms that they would have a hard time getting through traditional financing. All the "would like to", "thinking about", "want to" statements they made recently were part of the lobbying effort. The DOE program has clamped down on its requirements and the majority/all of GM's request probably didn't qualify. Let's see how their "plans" change as a result.

        This announcement is trying to save face.

        I posted this on the other side from GM's IPO prospectus, under "Risk Factors":

        "We may be unable to qualify for federal funding for our advanced technology vehicle programs under Section 136 of the EISA or may not be selected to participate in the program.
        The U.S. Congress provided the United States Department of Energy (DOE) with $25.0 billion in funding to make direct loans to eligible applicants for
        the costs of re-equipping, expanding, and establishing manufacturing facilities in the U.S. to produce advanced technology vehicles and components for these
        vehicles. Old GM submitted three applications for Section 136 Loans aggregating $10.3 billion to support its advanced technology vehicle programs prior to
        July 2009. Based on the findings of the Presidential Task Force on the Auto Industry (Auto Task Force) under Old GM's UST Loan Agreement in March
        2009, the DOE determined that Old GM did not meet the viability requirements for Section 136 Loans.
        On July 10, 2009 we purchased certain assets of Old GM pursuant to Section 363 of the Bankruptcy Code, including the rights to the loan applications
        submitted to the Advanced Technology Vehicle Manufacturing Incentive Program (the ATVMIP). Further, we submitted a fourth application in August 2009.
        Subsequently, the DOE advised us to resubmit a consolidated application including all the four applications submitted earlier and also the Electric Power
        Steering project acquired from Delphi in October 2009. We submitted the consolidated application in October 2009, which requested an aggregate amount of
        $14.4 billion of Section 136 Loans. Ongoing product portfolio updates and project modifications requested from the DOE have the potential to reduce the
        maximum loan amount. To date, the DOE has announced that it would provide approximately $8.4 billion in Section 136 Loans to Ford Motor Company,
        Nissan Motor Company, Tesla Motors, Inc., Fisker Automotive, Inc., and Tenneco Inc. There can be no assurance that we will qualify for any remaining
        loans or receive any such loans even if we qualify."
        • 4 Years Ago
        Aside from whether or not they thought they'd get that loan, there is the matter of the cost/benefit ratio. This was a loan that would have to be paid back, with interest, so GM had to consider whether the benefit of using that money to improve their facilities was worth the cost in interest payments.

        Perhaps they decided it was better to finance improvements from their own revenue stream, instead, or maybe they got a different loan at a better rate.
        • 4 Years Ago
        Chris M-

        That's not how the program works. The AVTM program approves you for a credit line under terms you could not get under private financing. When you get approved, you don't have to take it all at once or take it at all. You don't have to start paying interest. For example, Nissan did not take all the money they were approved for to build the EV battery and production line in TN.

        Loan approval just means that you have access to money under better terms than you could find otherwize. If you don't need the money, you don't have to take it. From a finance perspective, you want to be approved to have the option to have access to that money-- especially if you think interest rates will go up.

        GM's loan request primarily centered on retooling/developing their mass-production vehicles, with small improvements in fuel economy needed to reach pending CAFE standards. Under most estimates, the loan request was ~15 times what was spent to develop and produce the Volt-- most of the loan was designated for standard vehicles with incremental improvements (i.e. marginally more efficient power steering pumps or slightly more efficient full-sized truck transmissions). As the program clamped down on spending, chances are that financing vehicles that aren't "advanced" lost favor, leading to them not getting approval. As such, they "withdraw" from the loan application process for a loan they would not get approved for anyway.
        • 4 Years Ago
        And Mitt Romney didn't lose the Republican nomination for president, he withdrew. Wagoner wasn't fired, he resigned... there are a lot more examples. People withdraw/resign when they are unlikely to make it in order to save face.

        GM was pushing hard for these loans for a long time and spent a lot of time and money lobbying for them... it is unlikely they would have withdrawn if they had a good chance of getting them.
        • 4 Years Ago
        Again, those sections in the IPOs mean nothing. It's just protection against shareholder lawsuits. They list natural disasters and all kinds of ridiculous things in there.

        GM didn't not get the loan, they withdrew from the loan, remember?
      harlanx6
      • 4 Years Ago
      All GM has to do is make better cars at a cheaper price and they will be fine. Of course the same is true for all car makers, and some of them don't have to carry a huge parasite (UAW) on their backs like the big 3 do.
        • 4 Years Ago
        @harlanx6
        Apparently you think people who do the hard work are parasites and people who count the money are the real employees. I guess you are the type who thinks any labor that is not slave labor is no good.
        harlanx6
        • 4 Years Ago
        @harlanx6
        Not true. The union management is the parasite, not the workers who are vital. In case you haven't figured it out yet, what business is the union in? Why the dues business of course! There are 4 governmental agencies now looking after the well being of the workers, with volumes of regulations employers have to follow. The unions are a redundant anachronism and are their own worst enemy. Any entity whose sole purpose is to increase the costs of production will die by their own hand.
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