GM drops U.S. loan application after turnaround
WASHINGTON (Reuters) - General Motors Co has withdrawn its application for $14 billion in subsidized loans from the U.S. Department of Energy, saying it has the financial strength to fund investment in more fuel-efficient and electric vehicles on its own.
The move could provide a public-relations boost to GM, which has struggled to distance itself from the controversy of a $50 billion bailout and the stigma of having become "Government Motors" after being restructured in bankruptcy.
GM had initially seen the Department of Energy loan program as a potential source of financing that could stave off bankruptcy in 2008.
The automaker submitted its application for a low-interest loan under the program in October 2009, near the depth of the sharp downturn in U.S. auto sales.
"This decision is based on our confidence in GM's overall progress and strong, global business performance," Ed Welburn, GM design chief, said in a speech at the Washington auto show.
Shares of GM gained just over 1 percent to $38.33 in morning trade on the New York Stock Exchange. The stock has gained 16 percent since its November initial public offering.
Under Chief Financial Officer Chris Liddell, a 2009 hire from Microsoft, GM has focused on a plan to keep its debt to a minimum in order to protect itself from the next downturn.
After eliminating most of its debt in a bankruptcy funded and directed by the Obama administration, GM had about $25 billion of net cash at the end of September.
Some analysts have said earnings projections for the new GM over the next several years present it with a different problem: where to put a cash pile that Morgan Stanley analyst Adam Jonas estimates could top $70 billion by 2015.
CONTRAST WITH CHRYSLER
Welburn said he hoped that American consumers would view GM's decision to drop the loan application as positive.
GM rival Ford Motor Co has been boosted by its decision to forgo a bailout although it borrowed almost $6 billion from the Department of Energy in 2009.
Chrysler, which is carrying high-interest loans from the U.S. Treasury from its bailout, has been seeking $3 billion in Energy Department financing to bring down its financing costs.
"We don't want those kinds of debts to deal with," GM's Welburn said." I think it says a lot about the financial health of the company."
Separately, GM also said it would begin to sell its plug-in hybrid Chevrolet Volt in all U.S. states by the end of 2011.
That rollout is faster than GM had previously announced and comes as Chief Executive Dan Akerson pushes the company to ramp up production on Volt and roll out variants over the next several years to bring down its cost.
The Volt, which provides up to 50 miles of battery-powered driving before a gasoline-powered engine kicks in, is priced at $41,000 before accounting for tax credits.
GM has said it is losing money on the first-generation Volt, in part because of the cost of developing its 400-pound, lithium-ion battery pack.
Akerson and other GM executives have said they hope to bring down the cost of the Volt and push ahead in an area where they see a lead over Toyota Motor Corp.
The automaker said on Thursday it has 300,000 consumers registered as interested in buying a Volt.
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