Why is GM trying to deceive us?

General Motors announced on April 21^st that they have paid back in full, with interest, $8.4 billion in loans from the U.S. Treasury and Export Development Canada. GM even produced a television commercial featuring Chairman and CEO Ed Whitacre, in which he talks about GM repaying the government loans ahead of schedule. The commercial, however, is receiving a lot of criticism.

In a time where many Americans do not trust government spending, financial institutions and large corporations, GM should tread cautiously when making public announcements involving all three. The little confidence GM has gained with Americans over the past few months can easily be lost by any action proved to be deceptive. So was Whitacre telling the truth in the television ad? Yes. GM did pay back all of the money loaned to them and did so about five years early, but it is how the money was paid back that is causing controversy.

Any American informed about GM’s situation would be curious to know how a major corporation that filed for bankruptcy less than a year ago can already repay billon dollar loans. There are plenty of bloggers, like Dave Manuel that are curious as well. GM was able to pay back the loans—provided by taxpayers—with money that was also provided by taxpayers. No wonder so many people are displeased with Whitacre’s nationally televised commercial.

After GM filed for bankruptcy, it received $49.5 billion in cash from the U.S. government in exchange for company stock. GM also received another $8.1 billion in loans from the U.S. and Canadian governments. The U.S. government gave the automaker enough cash to survive the recession, but with auto sales increasing and the economy recovering GM realized it had more cash than it needed. So repaying the debt portion was not that difficult to do—GM just used the equity portion of their bailout to pay the debt portion.

Normally Americans do not really care how companies repay debts. However, when repayment involves their own money and the company’s CEO thinks it appropriate to boast about it in a national television commercial, Americans might be a little critical. Americans are already weary of Wall Street and continuous government spending. GM should avoid creating more distrust among the American public. The problem is that GM was deceiving the American public about how this loan payment was made. Also it is unethical of GM to mislead American taxpayers, especially when they own 61% of the company.

GM never should have produced that commercial. From the commercial the average American would conclude that GM used their profits to repay the loan—not bailout money received from the federal government.

GM mishandled this event. The repayment could have demonstrated that GM is secure enough to give back some money, which is a good sign for the company and its majority shareholder—the taxpayer. If GM wasn’t back on track they would have kept the money until business turned around. The public relations department should learn from this mistake and simply tell the truth. Giving the money back is a sign of financial recovery that could have been beneficial to the company’s public image.

The future of GM is looking bright as the company’s leadership is taking necessary actions for a successful turnaround—minus the television ad. A week after the commercial aired GM’s industry all-star, Vice Chairman Bob Lutz, released his farewell letter on the company’s blog. Lutz is an industry veteran and was brought back on after the bankruptcy to help save the company. In the letter Lutz states that GM is “poised to win.” He attempts to convey to the public his confidence in the company.

GM is focusing on improving their vehicles and strengthening its product lines, according to Lutz. Its quality is now on par with Toyota and Honda according to J.D. Power’s Initial Quality Survey. And their percentage of recalls is lower than most in the industry.

He continues by stating that the key metrics used to evaluate an auto company are moving in the right direction. Inventories are down, incentive spending is down, and average transaction prices are up.

Third, Lutz believes the people and leadership at GM are the “best and the brightest.”

Lutz might be correct with his reasons for why GM is “poised for success” and he has decades of industry experience to support his points, but it is hard to see GM returning to the top of the American auto industry any time soon.

It was extremely important for GM to return to its core divisions—Chevrolet, Cadillac, GMC, and Buick. Discontinuing or selling the Pontiac, Saturn, Hummer, and Saab divisions allows GM to focus more time and money on its key divisions. This will better position GM for success despite the fact that downsizing reduces the company’s market share.

It is easy for GM to see their inventories decrease when it terminates production of four car divisions. They may have decreased incentive spending and increased transaction prices, but GM still lags behind Ford, Toyota, Honda, Hyundai, Nissan, and Chrysler in percentage increase in sales from a year ago. Although the percentage increase of GM’s four remaining brands was 19.7%, its total sales increase was only 6.4% due to the discontinuation of Pontiac, Saturn, Hummer, and Saab. The other automakers all saw increases of at least 20%, with Nissan and Hyundai seeing increases above 30%. It may take some time for GM to become comfortable with their new position in the industry. Growth must come organically. GM should focus on building a great product and avoiding past mistakes.

Hopefully Lutz is correct that GM has the leadership and people needed to succeed. Individuals will likely question the company’s leadership upon learning the truth behind the CEO’s statements in the commercial, but lets hope that was the last misstep the leadership makes for awhile. If GM is on its way to success then there is no need to deceive the American public. Let your products speak for themselves and the sales will come. Lutz would agree with that.