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GM Says No To New Federal Loans

General Motors, which two years ago went to Washington looking for federal assistance, is using the Washington Auto Show to withdraw its request for up to $14 Billion in loans from the energy department.

These loans are part of a specific program to help auto companies transition to more fuel efficient products. Ford and Nissan received loan money while GM and Chrysler were dealing with their bankruptcies.

GM and Chrysler had been waiting for word on their loan applications, when General Motors made the announcement that they were no longer interested in the loan money.

"This decision is based on our confidence in GM's overall progress and strong, global business performance," said Chris Liddell, GM Vice Chairman and Chief Financial Officer, in a statement. "Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet."

GM has paid back the federal loan money it received as part of its turnaround. The rest of that aid came in the form of a government investment in the company. Last November's initial public offering of stock reduced that stake from 61 to 33 per cent. The Treasury Department has said that it wants to sell off the entire stake within two years.

"I think it makes a lot of sense," IHS Automotive Analyst George Magliano said of GM's decision not to seek the Energy Department loans. "First of all they are in much better shape this year than they were a year ago. You've got the stock offering. They are making money, they are doing very well with keeping their costs down, with the new product programs. They don't need an additional loan."

Chrysler says it has no plans to withdraw its loan application. Just last week, it's CEO, Sergio Marchionne told reporters that some programs have been put on hold as it waits for word from the government.

"There's a point in time when I have to go back into my kitty and start using the other cash to do this, which is not a good answer," Marchionne said. "That was not the purpose of the DOE funding. The DOE funding was to encourage innovation in energy."

All totaled, the Department of Energy made 25 billion dollars in loan money available. In the summer of 2009, it announced a series of loans, including money Ford used to convert the former Michigan Truck Plant into Michigan Assembly, which will build the smaller Ford Focus. Nissan used the money to help in its development of the electric Leaf.

General Motors says the decision not to seek these loans, will not impact its product development programs.

"Our forgoing government loans will not slow our aggressive plans to bring more new vehicles and technologies to the market as quickly as we can," said the statement from CFO Liddell. "We will continue to make the necessary investments to assert our industry leadership in technology and fuel economy."

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