General Motors Co. which is one-third owned by the U.S. Treasury Department, announced that it 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. When GM first filed Chapter 11 bankruptcy in 2009 many disparaged the bankruptcy reorganization saying that it couldn’t help the ailing company. At that time GM entered bankruptcy with over $30 billion in losses and had been declined financial aid by the President. But by working with their creditors, securing DIP financing and planning for the future the company has already raised $23 billion in investment funds and plans to raise an additional $4 billion in cash over the next year.
Chapter 11 bankruptcy allowed GM the financial flexibility to begin investing in technology that would ensure its future survival in the automotive industry. Without bankruptcy, the company may be been relegated to the dustbin of failed companies. Its assets and future were literally saved by bankruptcy reorganization.