Auto company General Motors (GM) has decided to pay back a $6.7 billion loan to the US government before the scheduled time. The company will start paying the US treasury $1 billion per quarter, late this year, and will repay the entire amount by the middle of 2011. In December 2008, GM received a $50 billion bailout from the treasury which was to be repaid through a $6.7 billion senior note and a 60 per cent equity stake.

Even though paying back the loan will improve the company’s financial position, it may turn out to be counter-productive if the company needs cash in case of a drastic decline in sales in the future. Another controversial aspect of the decision is that GM plans to use money received from the government to repay the loan.

GM had also received a $1.4 billion loan from the Canadian government, which it will pay back at the rate of $200 million per quarter.