General Motors Co., the automaker one-third owned by the U.S. Treasury Department, is withdrawing an application for $14.4 billion of government loans to develop fuel-efficient vehicles as the company works to reduce its debt.
The low-interest U.S. Energy Department loans aren’t needed because GM is in a strong financial position and can invest in new vehicles without aid, the Detroit-based automaker said today in a statement. GM applied for the loans in October 2009.
GM’s balance sheet and cash flow allow the company to fund projects without taking on debt, said David Whiston, an analyst with Morningstar Inc. in Chicago. The automaker had net income of $4.77 billion in the first three quarters of 2010 and $27.5 billion of cash and near-cash items as of Sept. 30.
“They will be printing money as sales volume comes back,” said Whiston, who predicts GM could generate $4 billion to $7 billion in cash a year. “It’s also a political thing where they don’t want to be seen taking any public money.”
GM raised more than $23 billion in an initial public offering of common and preferred shares in November that lowered the government’s ownership from 61 percent. The stake was acquired as part of the $50 billion GM received in its bankruptcy in 2009.
GM rose 78 cents, or 2.1 percent, to $38.67 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 17 percent from their $33 initial offering price.
Chief Executive Officer Dan Akerson is looking to at least triple the company’s target for electric-car sales by expanding the market for the Chevrolet Volt and adding models that would share similar technology, three people familiar with the plan said last month.
The withdrawn loan application “will not affect our aggressive investment in new products and technology,” Ed Welburn, GM’s vice president for global design, said today at the Washington Auto Show.
“Like most Americans, we believe that a self-sufficient, globally relevant GM is the best solution,” he said.
GM’s foregoing the loans will allow the government to support “a range” of other companies it is working with to develop technologies, Stephanie Mueller, an Energy Department spokeswoman, said in an e-mail.
The Volt will be available in every U.S. state by the end of the year, GM’s Welburn said today. The automaker, which originally planned to sell the Volt nationwide next year, is looking for ways to boost production to meet nationwide demand, Welburn said. He declined to give output targets for the Volt.
Akerson, 62, has asked his engineering team to double Volt production capacity starting next year, two people familiar with the plan said earlier this month. That would enable GM to make 120,000 Volts a year. The company is working with suppliers to get enough parts to meet the increased targets, the people said.
GM’s public perception may benefit from the company not having an Energy Department loan while Ford Motor Co. does, Welburn said today.
Ford, based in Dearborn, Michigan, received $5.9 billion of the loans in June 2009. Yokohama, Japan-based Nissan Motor Co. borrowed $1.6 billion, and Palo Alto, California-based Tesla Motors Inc. was given $495 million at that time.
Chrysler Group LLC sought $3 billion from the Energy Department’s $25 billion pool. The Auburn Hills, Michigan-based company’s effort to get the loans has taken longer than expected, CEO Sergio Marchionne said Jan. 19, adding that he thinks the automaker will receive the loans.
President Barack Obama called for 1 million advanced- technology vehicles on the road by 2015 earlier this week in his State of the Union address. U.S. Energy Information Administration figures compiled by Bloomberg Government show automakers will sell about 281,000 electric cars and light trucks from 2011 through 2015.
Representative Sander Levin, the top Democrat on the House Ways and Means Committee, said yesterday he is working to expand tax incentives for electric vehicle purchases at the behest of GM’s Akerson.
The GM board approved the withdrawal of its application in a meeting last week, according to an executive familiar with the decision who declined to be identified because the meeting was private. The company was within a few months of finishing the loan-approval process, another executive said.
Chief Financial Officer Chris Liddell has said GM wants to repay all debt by 2015. GM owed $15.6 billion in debt and preferred stock at the end of third quarter. The company announced plans in October to reduce debt and other obligations by $11 billion and said it had arranged a $5 billion, five-year revolving credit facility.
“Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet,” Liddell said today in the statement.
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