Was there an interest rate on the auto bailout received by GM et alia?

[OneTenthofOnePercent]

I was thinking today... was there an interest rate on the bailout received by the automakers in the massive bailout?


Why are they repaying these loans so soon? Businesses that receive loans usually take that capital and expand their operation. "It takes money to make money", as they say. If they happen upon a condition where they do not need that bailout money (essentially a big loan) then wouldn't the savvy move be to invest in themselves? Make more money, develop more products, research alternate fuels, ...? ESPECIALLY if the loan has a very low interest?!?

[zipplewrath]

1. So they are claiming.

I haven't seen what the rate was. I'd guess somewhere south of 3%. But they are paying it off so they can go public again. Otherwise, I suspect you're exactly correct, they'd not wanna pay off that loan for years.

[OneTenthofOnePercent]

2. So why are they paying it off with haste?

Either:

a) they do not think they can turn more profit on the loan than the low interest rate (scary, eh?).
b) They want to get big brother out of their office so they get back to "business as usual".

[zipplewrath]

3. So they can go public

Sorta 2b. They can't go public as long as they are under the cloud of government control.

[KittyWampus]

4. that's my understanding as well. You were simple and to the point.

[Zynx]

5. Companies play politics too. Having a huge government loan when they try to go public

again is not good. Also, many have sworn off buying GMs while they are "on the government dole".

[sinkingfeeling]

6. The interest rate for the loans was 1 point above LIBOR.

http://useconomy.about.com/od/criticalssues/a/auto_bailout.htm

[customerserviceguy]

7. Interest rates are about to go up

Even if the bailout loans were at low fixed rates, there would be political pressure on Congress to rewrite the terms of the loans when the general level of interest rates rose. Clearly, Ford has benefitted from being seen as not taking the same bailout money as borrowed by GM and Chrysler, and paying off the loans early is a way of trying to get back in the good graces of the autobuying public.

[Romulox]

8. They are only "paying back" 1/10 of the monies given them.

So the entire thing is an exercise in play-accounting, regardless of how the guzintas come out. :hi: