GM to start repaying $6.7 bln U.S. govt loan - source

By David Lawder

WASHINGTON (Reuters) - General Motors Co. will announce on Monday it plans to start repaying a $6.7 billion loan to the U.S. Treasury by year-end due to modest operating improvements, a source knowledgeable about the situation said.

GM, due to unveil its first post-bankruptcy earnings report on Monday, will begin making $1 billion quarterly installments on the loan on Dec. 31. At the same time, the automaker also will start repaying a $1.4 billion loan to Canada at a rate of $200 million per quarter.

GM was not required to make any payments on the U.S. loan before it matured in July 2015, but better-than-expected vehicle sales will let it start repayments much sooner than expected.

"The reason GM is in a position to do that is that they have seen performance that has been modestly ahead of what the expectation was when GM went into bankruptcy and emerged from bankruptcy," said the person, who was not authorized to speak publicly about the repayment plan.

GM vehicle sales fell off less than expected during its government-supported bankruptcy in June and July, which lasted only about 39 days. Sales since then, aided partly by government "cash for clunkers" incentives, have performed ahead of plan.

EARLY EXIT

As a result, GM has not been forced to burn through some $16 billion in taxpayer cash provided to the company when it emerged from bankruptcy. The source said GM has used only about $3 billion of these funds, which are contained in a restricted escrow account that cannot be accessed without Treasury approval.