Rumors are circulating that GM will vacate its corporate headquarters in Detroit to cut costs.
General Motors Corporation has requested another $2.6 billion in cash from the U.S. Treasury so that it can survive until the June 1st deadline for the approval of its revised “Viability Plan.”
The plan, as it now stands, forecasts the need for a total of $27 billion in U.S. taxpayer-supplied funds. Back in February GM requested $22.5 billion in taxpayer assistance for its restructuring.
The revised plan also assumes that GM will receive $5.6 billion from foreign governments, and another $5.7 billion from the U.S. Department of Energy to develop fuel efficient vehicles. None of this is certain, of course.
GM attributed its need for more money to a higher negative cash flow that resulted from lower than forecast vehicle sales. Through April, GM sales have plummeted 45% in the U.S.
On April 22nd, GM entered into a second amendment to the existing Treasury Loan Agreement, which increased to $15.4 billion the maximum amount available under the agreement. GM borrowed the remaining $2.0 billion available under that agreement on April 24th, 2009. GM has now apparently spent that cash.
If GM receives the additional $2.6 billion of loans, it anticipates issuing a promissory note of $173 million to Treasury as part of the compensation for these loans. This means that as of June 1, 2009 GM would have received loans from the Treasury of $18.0 billion (excluding the $884 million GM borrowed to purchase additional membership interests in GMAC) and has issued promissory notes of $1.1 billion as part of the compensation to Treasury for these loans.
As of the June 1st deadline, GM’s total outstanding U.S. Treasury debt would be $20.0 billion. Under the Treasury loan rules, at least 50% of the GM’s Treasury Debt outstanding on June 1, 2009 (including the $884 million GM borrowed to purchase additional membership interests in GMAC and the other promissory notes GM issued to Treasury as part of the compensation for the loans already given), would be exchanged for new shares of GM common stock.
GM is now forecasting that after June 1st it will require an additional $9 billionof Treasury funding. GM says that if it gets the money, another $600 million in Treasury promissory notes would be issued. If you assume the required exchange of 50%, or roughly $10 billion, for GM’s outstanding Treasury Debt on June 1st, GM’s total outstanding debt to U.S. taxpayers would be $19.6 billion.