GM borrows an additional $4 billion from Treasury

The automaker has now accepted $19.4 billion in government loans and says it expects to need $7.6 billion more after June 1.

Associated Press

May 23, 2009

New York — General Motors Corp. said Friday that it had borrowed an additional $4 billion from the Treasury Department, meaning the automaker has now accepted $19.4 billion in loans from the U.S. government.

GM started taking government money in December and said it intended to borrow $2.6 billion more by June 1 and an additional $9 billion after that. But in a regulatory filing Friday, GM said it needed $1.4 billion sooner than originally forecast.

The company didn't publicly disclose how it would use the money but said it had provided the information to Treasury officials, and they considered the loan acceptable.

"We appreciate President Obama's and his administration's ongoing support of GM and the domestic U.S. auto industry as we undertake the difficult but necessary actions to reinvent our company," the company said in a statement.

GM now expects to need $7.6 billion in loans after June 1.

GM has until then to complete restructuring plans that satisfy the government's auto task force, or else it will be forced to file for Chapter 11 bankruptcy protection. The automaker has been scrambling to cut labor costs, reduce its debt, shed dealerships and brands, and close excess factories.

The company this week reached cost-cutting deals with Canadian and U.S. unions that have yet to be ratified by members, but GM's unsecured bondholders have resisted an offer of a 10% stake in the company that would wipe out $27 billion in debt they hold. They say that's too small a stake for the amount they are owed.

Analysts have said it's highly unlikely GM will get 90% of its bondholders to agree to the offer, which is what the government is requiring.

In addition to the $19.4 billion that GM has directly borrowed from the government, its financial arm, GMAC Financial Services, has received $12.5 billion in aid, plus GM received a $1-billion loan to buy more equity in GMAC.

The government is also setting aside money to cover expected warranty costs as part of a program to assure GM car buyers that their warranties will be honored regardless of what happens to the carmaker.