GM withdraws application for $14.4 billion in federal loans
Thursday, January 27, 2011; 7:58 PM
General Motors withdrew its application for $14.4 billion in federal loans to upgrade its manufacturing operations, a move that reflects the bailed-out company's new financial strength, executives said.
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.
"This decision is based on our confidence in GM's overall progress and strong global business performance," Chris Liddell, GM vice chairman and chief financial officer, said in a statement. Withdrawing the loan application "is consistent with our goal to carry minimal debt on our balance sheet."
Last year, in a critical step toward shedding its bailout stigma, the company pulled off one of the largest initial public offerings of stock in history. In the process, the U.S. government slashed its stake in GM to 27 percent from 61 percent.
The withdrawal of the loan application, announced as GM was displaying its revamped lineup of cars at the Washington Auto Show in the District, demonstrates that the automaker can stand on its own, company officials said.
GM's board approved the decision to withdraw the loan application last week, and executives finalized the decision in recent days.
"GM's decision to produce the next generation of efficient vehicles without a government loan is yet another milestone in the turnaround of America's auto industry," Stephanie Mueller, a spokeswoman for the Energy Department. "The announcement will allow the Department of Energy to support a number of other innovative automobile technologies."
GM and other automakers had applied for the so-called advanced technology vehicles manufacturing loans, a $25 billion incentive program created in the Energy Independence and Security Act of 2007.
Ford, Nissan, Tesla and Fisker have been awarded loans under the program.
Projects can include "re-equipping, expanding or establishing manufacturing facilities in the United States to produce advanced technology vehicles or qualified components," according to the Department of Energy.
"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," Liddell said. "We will continue to make the necessary investments to assert our industry leadership in technology and fuel economy."