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GM borrows additional US$4 billion from government

GENERAL Motors Corp. said yesterday that it has borrowed an additional US$4 billion from the Treasury Department, meaning the automaker has now accepted US$19.4 billion in loans from the US government.

GM started taking government money in December and said it intended to borrow US$2.6 billion more by June 1 and an additional US$9 billion after that. But in a regulatory filing yesterday, GM said it needed US$1.4 billion sooner than originally forecast.

The company didn't publicly disclose how it will use the money but said it provided the information to Treasury officials, and they considered the loan acceptable.

"We appreciate President Obama's and his administration's ongoing support of GM and the domestic US auto industry as we undertake the difficult but necessary actions to reinvent our company," the company said in a written statement.

GM said it now expects to need US$7.6 billion in loans after June 1.

GM has until then to complete restructuring plans that satisfy the government's auto task force, or else it will be forced to file for bankruptcy protection. The automaker has been scrambling to cut labor costs, reduce its debt, shed dealerships and brands, and close excess factories.

The company this week reached cost-cutting deals with Canadian and US unions that still have to be ratified by members, but GM's unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out US$27 billion in debt. They say that's too small a stake for the amount they are owed.

Analysts have said it's highly unlikely GM will get 90 percent of its bondholders to agree to the offer, which is what the government is requiring.

In addition to the US$19.4 billion that GM has directly borrowed from the government, its financial arm, GMAC Financial Services, has received US$12.5 billion in aid, plus GM received a US$1 billion loan to buy more equity in GMAC.

The government is also setting aside money to cover GM's expected warranty costs as part of a program to assure car buyers that their warranties will be honored regardless of what happens to the automaker.


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