• Jan 27th 2011 at 10:58AM
  • 19
Earlier today, General Motors announced that it is withdrawing its request for $14.4 billion in direct loans from the Department of Energy's (DOE) $25-billion program aimed at retooling factories for the production of fuel-efficient vehicles. GM's chief financial officer Chris Liddel, outlined the automaker's choice to cancel its loan request, stating:

This decision is based on our confidence in GM's overall progress and strong, global business performance. Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet.

Speaking at the DC Auto Show, GM's Ed Welburn said, "This decision will not affect the strong investment we are making in new technologies and design."

For the past several months, The General had debated canceling its request for DOE loans, which the automaker first submitted in late 2008. The DOE has been having a tough time distributing the loans in a timely manner anyway, so last week GM's board of directors approved the decision to withdraw the application. However, GM's ongoing commitment to develop and produce fuel-efficient automobiles can be seen in vehicles like the plug-in hybrid Chevrolet Volt and the 40-plus miles per gallon Cruze Eco.

[Source: General Motors]
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GM Withdraws Federal Loan Application

WASHINGTON, D.C. – Acknowledging significant improvement in its business performance, General Motors today announced it is withdrawing its $14.4 billion application for direct loans from the U.S. Department of Energy (DOE).

The Advanced Technology Vehicles Manufacturing Loan Program (Section 136 of the Energy Independence and Security Act passed in December 2007) authorized $25 billion in direct DOE loans to companies toward retooling U.S. factories to make vehicles and components that improve fuel economy.

"This decision is based on our confidence in GM's overall progress and strong, global business performance," said Chris Liddell, GM vice chairman and chief financial officer.

"Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet."

Since July 2009, the newly formed General Motors Company successfully launched a $23.1 billion Initial Public Offering of stock and, for the first nine months of 2010, generated $4.2 billion in net income attributable to common stockholders. Additionally, GM has invested approximately $3.4 billion in U.S. facilities that have created or retained nearly 11,000 jobs – most of which have gone towards new, fuel efficient cars like the extended-range electric Chevrolet Volt, the fuel-sipping Chevrolet Cruze, and advanced battery manufacturing.

"Our forgoing government loans will not slow our aggressive plans to bring more new vehicles and technologies to the market as quickly as we can," said Liddell. "We will continue to make the necessary investments to assert our industry leadership in technology and fuel economy."

The U.S. Congress appropriated funding for the DOE loan program in the fall of 2008 at a time when the auto industry was seeking to maintain its product and technology programs while contending with the developing global economic crisis.
GM submitted its current application to the DOE in October 2009.

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    • 1 Second Ago
      • 4 Years Ago
      NO....just No!
        • 4 Years Ago
        Which Americans, the ones who gambled on their stock and lost? Tough titty. You walk into the casino KNOWING that there is a possibility that you can lose. They lost, put on your big boy pants, suck it up and move on.

        • 4 Years Ago
        words fail me that they would think this was a good idea after bankrupting tens of thousands of Americans so recently
      • 4 Years Ago
      IMO, this is more of a press release to garner favor in the public perception battle they are in due to the government-backed BK. GM is aware the negative impact the gov't assistance has created and need to do all they can to diminish it.

      If not for this negative perception, this would not be "news".
      • 4 Years Ago
      Good - now start paying back all the secured creditors who got screwed do to GM's last 20 years of incompetence. Will never buy another GM vehicle.
      • 4 Years Ago
      All snark aside, smart move for GM. Taking another loan from the government (even though this is a normal practice in business and government) probably wouldn't garner any favor with public perception and likely be seen (incorrectly) as another bailout.
      • 4 Years Ago
      Maybe there are technological standards GM has to attain rather than financial to qualify. So is this a graceful "no thanks, I don't have any factories that I want to switch over"?
      • 4 Years Ago
      More like they didnt want the public backlash from asking for more money.
        • 4 Years Ago
        @ alex,

        It isn't that the IPO didn't raise money for the treasury department, just that it didn't all go there. The ~$20B IPO raised $11.8 billion for the treasury (~59%) and another $1.8 billion was raised from sales of preferred shares. The DOE loan would have actually been more money than what was raised by the IPO to repay the taxpayers.

        In terms of "making money" the government lost money at the prices it sold shares at during the IPO. GM's stock would need to go up significantly for the government to break even when selling the rest of its stake in the company.
        • 4 Years Ago
        lne937s says to Dr. Brownthumb..."burrrrrrn".

        He just smoked your butt, man!
        • 4 Years Ago
        wrong page number: page 30 printed on the the prospective page, 37 of the PDF
        • 4 Years Ago
        A rather astute observation, no one can get anything past you [sarcasm].

        Where the hell have you been, they already got the credit line and the backlash, it was a part of what you've whining about. Maybe, they just didn't need the money. Their new business model is to not carry needless debt.

        DIY: A new chevrolet is bought every 7.4 seconds somewhere in the world.

        Surely, not a company worth saving. [more sarcasm].
        • 4 Years Ago
        @ Dr. Greenthumb
        From GM's IPO filing prospectus, under "Risk Factors", page 35

        "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."

        GM's current prospectus factoir in them getting these loans (which have favorable conditions vs. traditional financing) and will need to be revised down accordingly since they did not receive them. They were never approved to get them, but have been lobbying hard (see all the "want to", "would like to", "thinking about", etc. statements regarding the Volt) to get the loans. Chances are, it looked like they would not be approved, and they made this announcement to save face.
        • 4 Years Ago

        They shouldnt have to. They took Billions of dollars from the Government. Relinquished debt from a bankruptcy, have tax credits out the butt form the bankruptcy, and issued an IPO which was not all given to the government. When you have all of these unfair advantages you better be the class leader because most of your balance sheets show assets and very little liabilities.
        That having been said, in business it is healthy to have some kind of liabilities from debt take advantage of further growth.

      • 4 Years Ago
      Yeah I guess they would be healthy after dumping 169 billion in debt and screwing bondholders, shareholders, and the American people.

      Someone had to eat all that debt folks.

      I'm sick of the people on here who can ignore that and think GM is still this great company. You are what is wrong with America.

      Screw GM.

      Your products still stink, your doing the same things you did before and it's only a matter of time before you go belly up again. Which can't come soon enough.
      • 4 Years Ago
      I don't see the probelm here - it's a loan, and it would eventually be repaid.
      • 4 Years Ago
        • 4 Years Ago
        Exactly. Don't take on unnecessary debt.
      Emily Morgan
      • 3 Years Ago
      The automaker says it has enough cash available to cover the efficiency and modernization projects it had wanted to complete with low-interest federal loans from the Department of Energy. The decision was a marked contrast to 2008, when the company was facing collapse and went hat in hand to the government to ask for help. Emily from http://paydayloansat.com/
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