Lisa Simpson
Nov 25,2009
In: Finance

General Motors Hopes to Pay $8 Billion to the US Government

Automobile major General Motors is hopeful of paying $8 billion that it owes to Canada and the US. The company also said it has lost $1.2 billion in the third quarter.
Investors and analysts got the chance to look at the automaker’s accounts books, ever since it was bailed out by the Obama government. Its revenues have also dropped by 26 per cent. The present figure is $28 billion.
Experts say that GM is still under pressure although it has got a $50-billion package from the US government that gave a 61 per cent stake to the US government. The company is still on life support system and it will be for some time now. This was revealed by a portfolio manager at Fifth Third Bank, Mirko Mikelic.
The company CEO, Fritz Henderson, is of the opinion that the company has to do more work despite the fact that it has been able to meet its target. It has also taken some steps to emerge out of the bankruptcy.

The company must plug all the loopholes so that it stops bleeding, and that has to be the first tentative step towards the inevitable. The company has already done away with 34,000 jobs. It has effectively brought down its debt by $78 billion. It has also hoarded cash of $43 billion. This was because of the financing package that it received from the government. GM has also cut down the stock of cars by almost half.

The earlier CEO, Rick Wagoner, had resisted a plan that it felt would hurt consumers. Hence, he had to leave the company.

It may be noted that GM had almost $43 billion cash as compared to $14 billion the previous year. Of that, $17.4 billion was created because of the bankruptcy funding that it had received from the government. The automaker says that it paid the government debt from the taxpayer account. An automotive adviser Brad Coulter, however, has run down the effort by saying this is putting money from one pocket to the other. What the company needs to do is to instill consumer confidence. It has to stabilize and bring back consumers to the showrooms. Creditors and investors also need to be convinced that it is fine to invest in the auto business now.
It may be noted that the auto maker had lost $88 billion over the last four years. The company’s accounts were not prepared keeping the normal accounting principles in mind.

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