GM to repay tax loans early

GM is to begin repaying $6.7 billion (£4.1bn) in US and Canadian government loans early.

The announcement was made as the company released its earnings for the third quarter of 2009. It lost $1.2bn (£700m) between its emergence from bankruptcy on July 10 and the end of the third quarter on September 30. GM Europe lost almost $400m (£240m).

GM said revenue from car sales plunged 25 per cent compared to a year earlier. It also predicted falling sales for the rest of this year and early next year, but said sales would stabilise during 2010.

Despite the losses, GM reported improved cash flow during the quarter, leaving it with $42.6bn (£25.4bn) in cash at the end of the quarter.

It is this cash flow situation that has given GM the confidence to begin US government loans early.

Repayments will begin with a $1 billion (£600m) payment in December. It is then expected to make similar payments every three months for two years, although CEO Fritz henderson has not ruled out repaying the entire debt by mid-2010, if business conditions improve sufficiently.

GM also will make $200 million (£120m) quarterly payments to the Canadian national and Ontario provincial governments against its $1.4 billion (£830m) debt.

In addition Germany will be repaid the outstanding 400m euros (£358m) that it lent in support of GM's European business Opel.

GM is required to repay the loans by July 2015.

"This [decision to pay the money back early] is as much about management confidence as consumer confidence - we think it is important to show our commitment to the tax payer," said Henderson.

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