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March 11, 2010

US: GM’s Whitacre hints early federal loan repayment likely

General Motors will repay about US$8bn in debt to the United States and Canada before June and could go public in a way that would allow taxpayers to make a profit on the bailout, chief executive Ed Whitacre has said.

General Motors will repay about US$8bn in debt to the United States and Canada before June and could go public in a way that would allow taxpayers to make a profit on the bailout, chief executive Ed Whitacre has said.

Those financial targets are more aggressive than previously announced and come as Whitacre pushes GM to move faster to boost sales and win back US market share after three decades of steady decline, Reuters noted.

Whitacre said the top job at the automaker was proving harder than he had expected because of the challenges of reforming a bureaucratic corporate culture.

“It’s been tougher than I thought,” Whitacre was quoted as saying about the CEO post. “As you might guess, after going through a big bankruptcy and a big disruption, people have to be motivated and see something ahead,” he said. “GM had a lot of baggage and that has to be changed and it is being changed.”

Whitacre said in December that GM would pay back government loans extended to finance its restructuring in bankruptcy by June. “I believe we’re going to beat that date,” he said this week.

“We’re building momentum, and because the company has been completely restructured, and the progress we’re seeing, I believe, is sustainable,” Whitacre told business leaders in his home town of San Antonio, Texas.

“For the first time in over a decade, General Motors has a healthy, clean balance sheet. We are not being crushed under mountains of debt. We have a cost structure that works.”

Whitacre said he believed the government would be able to sell all of its 61% equity in GM for a profit, a milestone that most outside analysts have seen as out of reach.

“After we pay back the loans from the government, we intend to take this company public again, in the near future, and the government, I believe, will be able to sell all their stock at a substantial gain,” Whitacre said.

He added: “I think the government is going to make a lot of money … It will prove to have been a great investment.”

Whitacre also said there were positive signs that GM’s US market share was holding steady after years of decline.

“We’re right at 20%, which is good,” he said. “We’d like that to increase over time. I can’t tell you a percent – as much as possible.”

GM executives have said Whitacre has been clear he will hold them responsible for delivering on a promised turnaround.

Whitacre, who has made numerous changes after joining GM as chairman at the request of the Obama administration last year, and then becoming CEO after Fritz Henderson resigned, said he was confident that the right leadership team was being put into place.

“We’re working hard on getting the right people in the right positions with enough dollars to do what we need to do,” he said.

Whitacre, who has been commuting to GM from Texas, said he believed it was key to get the right working-level executives in place because of his own lack of experience in the auto industry. “I don’t have a clue about how to make a car … I know a lot more about telephones,” he said [in a reference to his time as chairman and CEO of telecomms firm AT&T].

According to Reuters, Whitacre said GM would end up with about 4,500 dealers in the US market after offering to restore 661 dealer franchises it had targeted for closure.

“It seems logical to me that the more good dealers you have, the more cars you’re going to sell,” he said.

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