In case you missed it, General Motors has a new commercial out bragging about the company paying back all of its government debt. Last week, the company paid back the last $4.7 billion of its $6.7 billion loan. Does that make its commercial accurate? Technically, but if you consider the bigger picture, then this repayment looks much less significant than GM wants Americans to believe.
Here's the commercial:
The key quote comes from GM Chairman and CEO Ed Whitacre towards the beginning:
We have repaid our government loan in full, with interest, five years ahead of the original schedule.
Again, this is technically true. The entire $6.7 billion loan has been repaid. But as pointed out last week, that was a small fraction of its $50 billion bailout. The U.S. government still retains 60.8% ownership in the firm, even though the tiny bit of debt has been repaid. So to act like GM is in the clear in regard to its obligation to the government is misleading at best and disingenuous at worst.
In fact, it shouldn't have been very hard for GM to repay this loan -- even without any profit. That's because it used the equity injection from its bailout to repay the loan, according to Special Inspector General for TARP, Neil Barofsky. So even implying that GM was able to repay the government loans due to its improved performance is misleading. In reality, it just took money from Uncle Sam's right hand and put it into his left.
(Nav Image Credit: JustMcCollum (Read Profile!) flickr)