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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 21, 2010 at 9:30 AM

GM’s challenge isn’t replaying debt but making sexy cars; worry about the second half of ’10

General Motors crossed an important milestone today by repaying $8.1 billion in loans from the federal and Canadian governments. American taxpayers still own a substantial share of GM: $45 billion that could be recouped through a stock offering.

The GM and Chrysler bailouts were necessary to save 1 million jobs and a major portion of what’s left of manufacturing in the United States. Repaying through a stock offering is entirely possible. It’s worked before, with the federal rescue of northeastern railroads through the formation of Conrail, which was later successfully privatized. The real question is whether this is indeed a “new GM,” as its executives tout.

The old GM became new many times, including repeated draconian cuts to its workforce and closing dozens of plants. The Saturn reinvention didn’t take, both because of resistance from the United Auto Workers but especially because the executive suite of GM’s heart just wasn’t in it. Most of all, GM just couldn’t design and sell cars that appealed to the public. So a new, new GM? We’ll see. Toyota has given the company a gift that could only be bungled by, well, General Motors.

The Back Story: As we continue the “is it really recovery” discussion, NYU economist Nouriel Roubini and his crew say, “not so fast.” Many economies are growing, while trade and output are improving. But “the path to a self-sustaining recovery is not yet clearly shaped, at least in advanced economies. The recovery will be multi-speed.”

The roadblocks: debt, excess capacity and unemployment. This year, the United States will lead growth along with some less-indebted, commodity-rich economies, but as fiscal stimulus and the boost from inventory restocking wears off, weakness in final demand will cause the pace of growth to slow.”

Today’s Econ Haiku:

Buy American

EADS, apple pie

A tough tanker sell

Comments | More in Auto industry, Outlook

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