Lending billions of dollars to General Motors to help it avoid bankruptcy in 2009 was the right decision and saved jobs, Prime Minister Stephen Harper said Wednesday.
"Less than a year ago, in the eye of a global economic storm, our government acted quickly and responsibly to protect Canadian jobs," Harper said in a statement.
The automaker announced earlier in the day that is has repaid $1.4 billion in loans it received from the Canadian and Ontario governments. GM has also paid back $6.7 billion in loans it received from the U.S. government.
"This was not a decision we took lightly," said federal Industry Minister Tony Clement.
"But, at the end of the day, we knew that if we did not participate, what was at risk was not just the GM jobs but all the other parts manufacturers and other industries that go into having an auto sector in this country, and that has been estimated to be over 400,000 jobs that were at risk.
'We are able to repay the taxpayer because we are designing, building and selling the best cars and trucks GM has produced. Ever.' — Ed Whitacre, CEO of General Motors
"In retrospect, that decision seems to be borne out by the positive news of today."
GM chief executive officer Ed Whitacre made the announcement at the company's Fairfax assembly plant in Kansas City, Kan., where he also announced that GM is investing $257 million in that factory and the Detroit-Hamtramck plant, both of which will build the next generation of the midsize Chevrolet Malibu.
GM got a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as it went through bankruptcy protection last year.
The U.S. considered $6.7 billion of the aid to be a loan, while the Canadian governments held $1.4 billion in loans.
Payments come 5 years early
"This is years ahead, about five years ahead of the original loan schedule," said Whitacre, who added the repayments are a sign that the automaker is on its way toward reducing government ownership of the company.
GM hopes to repay the remaining $45.3 billion to the U.S. government and $8.1 billion to Canada, money it received in exchange for large stakes in the company. Canada now owns roughly 12 per cent of the company and the U.S. government owns 61 per cent. GM plans to repay both with a public stock offering, perhaps later this year.
"We are moving at GM and improving at a rapid pace. This is the new pace of GM today," said Whitacre.
Chrysler loans still outstanding
Clement said Canada and Ontario are still owed money by Chrysler LLC, to which the governments gave $2.9 billion in aid in the spring of 2009. The minister said Chrysler does not intend to repay the loans early, as GM did.
"No, they're sticking to the plan that was set out in the business plan, which has a scheduled repayment over an eight-year period, " Clement said. The majority of the funds given to Chrysler were in the form of loans, rather than equity, he added.
Repaying loans a top priority for GM
During the financial crisis that led to GM filing for bankruptcy protection last year, the automaker closed 14 factories and shed more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs. The company now employs 9,000 people in Canada and about 40,000 hourly workers in the U.S.
GM had made about $2 billion in loan payments to the U.S. government and $384 million to Canada in December and March, and had promised to repay the full loans by June.
But company officials have said its cash flow, mainly from the sales of newer models, has been better than expected, allowing it to make the remaining $5.8 billion in payments early.
"We are able to repay the taxpayer because we are designing, building and selling the best cars and trucks GM has produced. Ever," said Whitacre.
GM officials say the company's public stock offering will take place when the markets and the company are ready.
They will not predict how much of the remaining government debt will be repaid from the stock offering, but said it likely will take years for the governments to divest themselves fully.
The stock offering hinges on GM posting a profit, which Whitacre has said could come this year. GM lost $3.4 billion in the fourth quarter of 2009 on revenues of $32.3 billion.