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GM Repays TARP Loan. (Not Really.)

When I saw the ads for General Motors running on TV proclaiming that, while they could understand our skepticism over the company's bailout by the Fed, they were back and stronger than ever. GM's CEO, Ed Whitacre, is featured throughout the whole commercial, acting as the company's spokesperson. In it, he proclaims; " we have repaid our government loan, in full, with interest, five years ahead of schedule."



I was duly impressed by GM's efforts; $5.8 billion, repaid in such a short period of time, was quite a feat. I took GM's CEO at his word, believing that GM must have really done some serious internal reviewing and cost-cutting, while also increasing sales. Bravo to GM! My respect for the company went up a couple of notches.

Unfortunately, like GM's ad agency, McCann Erickson, I took the manufacturer at their word and didn't check out the facts. Now, like millions of others (including McCann), I played the fool because I accepted the claim as truth.

Considering the fact that I've written - and personally alluded to - my view on advertising claims that seem to be exaggerated is "Contempt Prior To Investigation," I am kicking myself in the ass, as I'm sure that McCann Erickson must be doing as well.

According to a letter sent by Senator Charles Grassley to Tim Geithner (Secretary of the Treasury), $17.4 billion was loaned to GM in an escrow account at the Treasury. After GM paid $6.7 billion back to the government, another $5.6 billion given to the auto manufacturer.

Which, in case you weren't keeping track, comes to $16 billion that GM still owes.

Perhaps even worse, the Obama administration is allowing GM to use US Treasury TARP (Troubled Asset Relief Program) funds that are in escrow to pay back the money the company borrowed, essentially borrowing money to pay back money.

Plus, the most recent financial news shows that GM hasn't really done any miraculous, introspective, cost-cutting; the company is still losing billions of dollars, just not as many billions. To add insult to injury, GM's Vice Chairman Stephen Girsky admitted that the claim in the commercial was not true.
So, to sum it all up:

• GM is poorly managed  
• GM's CEO either doesn't tell - or know - the truth, 
• There are holes in the TARP that need to be addressed immediately 

It's a bigger mess than originally suspected.
GM has not only further damaged their credibility, but the reputation of their agency. However, McCann Erickson's fault lies in not checking the facts.
The takeaway's of this debacle are threefold, and aren't much more than common sense;

• If you're a CEO who wants to remain employed, don't make claims that are false (lying), or that you cannot back (ignorance).
• If you're an agency that's "simple and highly focused mission statement" is, "Truth Well Told," make sure you're telling the truth. Otherwise, your motto is, "Contempt Prior to Investigation."
• If you're a citizen of the United States, don't believe everything you see on TV.