GM's Massive Taxpayer IOU Remains

DETROIT ( TheStreet) -- Anyone who skimmed the headlines about General Motors' ( GM) bailout repayment in April could be forgiven for wondering why we're still talking about it.

"GM Repays Treasury Loan in Full," said the U.S. Treasury Department's press release.

"We have repaid our government loan, in full, with interest, five years ahead of schedule," then-CEO Ed Whitacre said in a commercial, to a backdrop of empowering instrumental music.

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"We are encouraged that GM has repaid its debt well ahead of schedule," Treasury Secretary Tim Geithner said in a statement .

But skeptics might have noticed that GM wasn't actually repaying all of its bailout - just its debt, in technical terms. It still owed taxpayers $2.1 billion in preferred stock, along with a 60.8% equity stake that's now being cashed in.

Even seven months later - after GM raised $23.1 billion in the largest initial public offering ever - the company still owes the government a big chunk of change.

According to the most recent transaction report for the Troubled Asset Relief Program, the Treasury Department distributed $50.7 billion to General Motors; $16.3 billion to its one-time financing subsidiary, GMAC (now rebranded as Ally Financial); offered a $3.5 billion credit line to GM Supplier Receivables; and will distribute up to $1.5 billion in incentives to GMAC Mortgage to workout troubled homeowners' debt.

Taxpayers have been made whole, with interest, on just one of those components - the smallest one.

GM's supplier receivables subsidiary ended up using only $290 million of the credit line. In a restructured debt arrangement, GM paid back the borrowings, with $56.5 million in interest. It represented a 19% return on investment over less than a year.

As for the larger taxpayers' investments, the picture isn't quite as pretty as it's been painted.

The government has received $20.7 billion back from General Motors - meaning the automaker alone - through $7.1 billion in debt repayments and $13.6 billion in sales of common stock during the IPO. The Treasury now has 553.8 million shares of GM, worth $18.7 billion as of Friday's close. That leaves an $11.3 billion gap between what taxpayers shelled out to GM (the automaker) and where those loans and investments stand today.

As for GMAC, it hasn't paid back any of its bailout funds.

The incentives offered to GMAC Mortgage aren't meant to be repaid.

In practical terms, the best way to sum up GM's bailout is this: Taxpayers committed as much as $70.5 billion to the automaker and its one-time subsidiaries at the pinnacle. Just $21 billion, or 30%, has been returned so far, with another $49.5 billion outstanding. Taxpayers may offer GM's former mortgage lender another $1.5 billion in incentives, free of charge, to help troubled borrowers. (GMAC Mortgage, it's worth noting, is the only servicer that's been sued by the government for alleged fraud over the so-called "robosigning" scandal.)

It's true that General Motors has made great progress, a whole lot faster than anyone expected. The Treasury believes it will lose about $17 billion on automotive industry investments, far below initial cost estimates. But, importantly, the most recent from TARP's inspector general indicates that GM's offering price fell about $100 short per share.

"In order for Treasury to recoup its common stock investment in New GM and the $986 million retained by Old GM, a review by SIGTARP for Senator Charles Grassley determined that New GM would need to receive an average of $133.78 per share, before giving effect to any stock split that may occur," says the report. "This figure does not include the underwriting, legal, and other costs that Treasury will incur in connection with the IPO, nor does it account for any interest or dividend payments received from New GM or the costs incurred by Treasury to borrow the funds it provided to the GM entities."

GM's advertising campaign has generated a lot of buzz recently by acknowledging defeat, thanking Americans for their charity and promising to turn the company around. But in regards to how much of its bailout has been repaid, the opening of GM's "Reinvention" commercial from the summer of 2009 might be the most apt.

As a sun rises and sets over the skyline of Detroit, an announcer says: "Let's be completely honest."

-- Written by Lauren Tara LaCapra in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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