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GM's Whitacre: U.S. may recoup all costs

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GM's Whitacre: U.S. may recoup all costs

It might even make money, Whitacre says



KANSAS CITY, Kan. -- Before a cheering crowd in a Chevrolet Malibu plant, General Motors CEO Ed Whitacre kicked off a round of good news Wednesday about the Detroit-based automaker, which exited bankruptcy just nine months ago.

Aside from confirming that GM has paid off $5.8 billion in loans owed to the U.S. and Canadian governments five years before the government deadline, Whitacre boldly predicted the U.S. government would recoup its entire $50-billion-plus investment in the automaker and possibly even make money on it.

"I think the government and us -- the taxpayers -- made a terrific investment and I think it's going to pay off big time," said Whitacre, who later Wednesday chartered a plane to Washington, D.C., to meet with government officials.

He revealed new investments for factories in Detroit and Kansas City and said the company's first-quarter results, due in May, are impressive.

He also said the highly anticipated Chevrolet Volt electric car would be released in October ahead of an expected November release.

Also Wednesday, Mark Reuss, president of GM North America, said the company could soon start hiring -- at lower wage levels -- because the company's plants are, on average, in full use and dealers are clamoring for GM's new products.

The series of positive news is precisely what the automaker needs to draw interest in the company's initial public offering, analysts said. It also fuels feelings among workers that the automaker has turned the corner.

That's the assurance Sherri Thompson, 45, needed to buy a house. "I've been wanting to buy a home. I was nervous about doing it," said Thompson, a single mom and a production worker who transferred to the Kansas City plant four years ago from Chicago. "Now I really think I can go buy a house."

The excitement on the plant floor over GM's new position was palpable. Whitacre didn't even get to finish his sentence before someone on the plant floor shouted "Yeah!"

Talking to reporters later, Whitacre said he expects GM's stock offering to be valuable enough for the U.S. government, a 61% shareholder in the automaker, to earn back more than the $40 billion it allowed to be converted into equity.

But whether the government will ultimately earn all of its money back is up for debate. In a report this week, the White House said it expects its investments and those of the Bush administration in GM, Chrysler and GMAC "will likely result in some loss," but will be lower than expected.

Reuss, during a conference call with reporters, said GM's goal is to help the government make money on its shares, not just break even.

"The goal here is to have them make money on their investment. That's really what we're trying to do here," Reuss said.

An initial public offering that is priced higher than the government's investment is not out of the question, said Chris Price, a managing director of the investment banking division of O'Keefe and Associates in Bloomfield Hills. But GM must be careful not to flood the market with shares and will likely have more than one stock offering, Price said. "Ultimately, the government's exit from GM at a profit will depend on GM's continued success through 2011 and beyond."



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