GM to Repay Taxpayers. Definitely. Maybe.

General Motors’ Chairman, Ed Whitacre, said yesterday that GM plans to pay back the government loans it accepted during its bailout/bankruptcy, contradicting a GAO report that maintained GM will never be able to return those taxpayers' funds. On the one hand, GM seems to be doing better than anyone expected. Its decision to not sell Opel to a Canadian parts suppliers and Russian bank and, instead, to restructure its main European subsidiary on its own, is a sign of confidence. On the other hand, Whitacre is only talking about paying back $6.7 billion in cash that GM owes the Treasury. There’s another $50 billion to consider, which the Treasury took on as stock, and which will presumably be worth something when the New GM issues an IPO.

The Economist recently took a look at the U.S. car industry and rightly determined that GM should be profitable in a year or so, given that it’s been downsized to earn money in a domestic auto market of around 10 million new vehicles per year. The U.S. auto market should recover to between 12 million to 14 million by 2011-12 and could improve well beyond that by 2014. In that kind of environment, a GM IPO makes sense. The obvious question is whether the stock will ever be valued highly enough to translate into a $50 billion holding for the Treasury. Obviously, if it doesn’t, the taxpayer will lose money on the simple arithmetic aspect. However, the cumulative gain of having avoided massive unemployment out of a GM/Chrysler liquidation, which might have pushed the jobless numbers into double digits much earlier this year, could mean that taking a loss on the bailout could be OK in the long run.