The automaker said on Wednesday that it wired $451.8 million
to repay the full loan with interest.

“I would like to thank the Department of Energy and the
members of Congress and their staffs that worked hard to create
the (Advanced Technology Vehicle Manufacturing) program, and
particularly the American taxpayer from whom these funds
originate,” Tesla Chief Executive Elon Musk said in a statement.
“I hope we did you proud.”

Republicans have criticized the Obama administration’s
support of new-technology companies, including struggling
automaker Fisker Automotive Inc, as well as
electric battery maker A123 Systems and solar panel maker
Solyndra. Both A123 and Solyndra filed for bankruptcy.

DOE officials heralded the Tesla payoff in a press release.

“When you’re talking about cutting-edge clean energy
technologies, not every investment will succeed – but today’s
repayment is the latest indication that the Energy Department’s
portfolio of more than 30 loans is delivering big results for
the American economy while costing far less than anticipated,”
U.S. Energy Secretary Ernest Moniz said.

Moniz said more than 90 percent of the loan loss reserve
Congress established remains intact, while losses represent
about 2 percent of the overall $34 billion portfolio.

DOE first offered loans to Tesla and other automakers in
June 2009, when the companies could not arrange financing
through public markets during the recession.

The DOE’s $465 million loan, received in 2010, allowed Tesla
to open its plant in Fremont, California, and build the Model S
electric car, which recently received a near-perfect score from
Consumer Reports magazine and starts at $70,000 before a federal
tax credit.

The payoff was more good news for a company that reported
its first quarterly profit earlier this month.

Musk, a billionaire who owns 27.5 percent of Tesla, said on
Monday that the company would repay the loan.

Tesla was funded privately through its first seven years
after its 2003 founding, and it received the DOE loan as part of
the advanced technology vehicle manufacturing program.

After making payments last year and the first quarter of
this year, Tesla said it repaid the balance of its loan using a
portion of the almost $1 billion raised last week in stock and
notes offerings.

Mark Reuss, head of GM’s North American operations, said the
launch of the 2014 Silverado and GMC Sierra pickups is going
“really good” and there had been no hiccups to slow the rollout.

Analysts estimate GM has invested $3 billion to $4 billion
to develop the new trucks and related engines, and to revamp the
plants where they are built. The last major redesign of the
trucks was in 2006.

Reuss said advertising for the new big trucks will not begin
until there are enough on dealer lots to meet demand.

“We want to match availability with the marketing, so we’ve
still got some weeks before we get everything to everybody that
needs it,” he told reporters after an event at which he
announced the creation of a summer internship program for
Detroit-area high school students.

Reuss was comfortable with inventory of about 100 days for
current truck models and said that was not too high.

The trucks are a linchpin in GM’s ongoing battle with No. 2
U.S. carmaker Ford Motor Co, whose F-150 truck is the auto
industry’s top-selling vehicle.

The current versions of the big trucks and related SUVs
generate profit of $12,000 or more per vehicle and account for
about 60 percent of GM’s global profit, according to analysts.
Citigroup has estimated the new models could bring the automaker
more than $1 billion in additional operating earnings in 2013
and 2014.

Reuss also said on Monday he was not concerned that the
softening Japanese yen could lead to rising incentives across
the industry.

“Everybody wants high-quality sales, not sales at all
costs,” he said.

Reuss expects GM’s May U.S. sales to be up from last year
and he remains unconcerned at this point about the industry’s
weaker-than-expected sales in April, saying it was just one
month of results.

“There’s some optimism out there,” he said.

Reuss also agreed that GM topping the $33 price at which the
company returned to the stock market in the fall of 201 was a
positive psychological point. He added that, if the city of
Detroit seeks bankruptcy protection, it will not affect GM
financially or operationally.

“These are definitely safer vehicles. At what cost though?”
Ray LaHood told reporters at a connected-vehicle conference in
Ann Arbor, Michigan. “To me, that’s what the bottom line’s going
to be. Safety has a cost and we’re going to have to make that
judgment.”

LaHood declined to estimate what the cost of the technology
that allows vehicles to communicate with each other and
surrounding infrastructure would need to be to attract wide
adoption by consumers.

“It will be up to car manufacturers to help us figure out
what the cost of all this is going to be,” LaHood, the outgoing
transportation chief, said at a University of Michigan
Transportation Research Institute conference.

Since last August, U.S. officials have been testing a fleet
of “talking” cars in Ann Arbor that may help American drivers
avoid crashes and traffic jams.

The U.S. Department of Transportation and the University of
Michigan fitted almost 3,000 cars, trucks, buses and motorcycles
with wireless devices that track other vehicles’ speed and
location, alert drivers to congestion, or change a traffic light
to green.

Vehicle-to-vehicle communication may help avoid or reduce
the severity of four out of five crashes that occur when a
driver is not impaired, U.S. regulators have said.

Results from the study will help the National Highway
Traffic Safety Administration decide whether the technology
should be mandatory. A decision on such a rule will not be made
until the testing in completed in August, officials have said.

LaHood said transportation officials have been studying the
first six months of data from the test, but he does not expect
any conclusions for about a year. He said the technology has
operated just as officials expected.

Officials in the test program said about 8 billion
transmissions between vehicles and infrastructure have been sent
since the test in Ann Arbor began.

The road test in Ann Arbor, a college town of nearly 28
square miles (73 square kilometres), is the largest of its kind
and cost $25 million. Eight major automakers, including General
Motors Co and Toyota Motor Corp, supplied the
cars.

The vehicles in the test can communicate with roadside
devices in 29 areas in Ann Arbor. If conditions are safe, the
vehicles can change the traffic light to green or let the driver
know if a light is about to change.

Connected vehicle systems use a technology similar to Wifi
called dedicated short range communication, which is unlikely to
be vulnerable to interference, U.S. officials said.

The cars can track other cars’ location and speed. They can
also determine if a driver is braking or turning the wheel.
Details such as the license number or VIN number are not shared.

The road test represents the second phase of the
transportation department’s connected vehicle safety program. In
a study conducted in 2011 and early 2012, the department found
that nine out of 10 drivers had a “highly favorable” opinion of
vehicle-to-vehicle technology. LaHood said he assumed there
would be a third phase in the testing.

Volkswagen AG’s (VOWG_p.DE: Quote, Profile, Research, Stock Buzz) premium brand is joining a parade of automakers who have announced plans to build cars in a country that is seen as a doorway not only to the rest of North and South America but to the world. Audi officials said the $1.3 billion plant will open in three years and eventually be the German brand’s only source globally for its Q5 SUVs after it opens in mid-2016.

“Mexico was chosen very deliberately,” Audi Chairman Rupert Stadler told more than 500 industry and government officials outside the town of San Jose Chiapa in central Mexico. “It is situated between North and South America, making it a linchpin between the two regions.” He added that Mexico was an “ideal export base.”

With numerous free trade agreements, a cheap, well-educated labor force, and proximity to the lucrative U.S. auto market, combined with growing demand in South America, automakers have been lining up for two years to set up shop in a country that could eventually overtake Brazil as Latin America’s biggest economy.

Audi’s ceremony came two days after Japanese automaker Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) said it would build a $470 million transmission plant in the central state of Guanajuato, near an $800 million assembly plant that is expected to begin operations in February 2014.

Other automakers who have announced plans to open plants in Mexico include Mazda Motor Co (7261.T: Quote, Profile, Research, Stock Buzz) and Nissan Motor Co(7201.T: Quote, Profile, Research, Stock Buzz), while companies already there – General Motors Co (GM.N: Quote, Profile, Research, Stock Buzz) and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) – continue to pump hundreds of millions into their plants. The new plants also are attracting supplier factories and more could be on the way as Nissan’s Infiniti brand, BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) and Hyundai (005380.KS: Quote, Profile, Research, Stock Buzz) are weighing the possibility of building plants in North America.

When Nissan said in January 2012 that it would build a $2 billion plant in the central state of Aguascalientes to open in late 2013, CEO Carlos Ghosn called Mexico, where it has now two plants and is the market leader in sales, production and exports, a “key engine” to Nissan’s growth in the Americas. The Japanese automaker exports to 115 countries from Mexico.

Last year, Mexico attracted $3.7 billion in announced investments by automakers alone, matching the U.S. total, according to the Center for Automotive Research in Ann Arbor, Michigan. IHS Automotive estimated that investments by automakers in Mexico over the next few years could total $3 billion annually.

From 2000 to 2013, vehicle production in Mexico has risen almost 3 percent annually, compared with declines in the United States and Canada of 1.3 percent and 2.4 percent, respectively, according to Boston Consulting Group. That trend will hold through 2018 as Mexico’s production is forecast to grow 5 percent annually, compared with 3 percent growth in the United States and a 4 percent decline in Canada.

Mexico is the eighth largest producer of vehicles in the world.

Audi executives touted Mexico’s good infrastructure, competitive cost structures and existing free-trade agreements in picking the site for the new plant, which will cover an area the size of 400 soccer fields. They called the Mexian plant a “dream moment.” VW has a VW plant in nearby Puebla City and an engine plant in Silao.

VW has said it wants to boost sales in the United States, the world’s No. 2 auto market, to 1 million vehicles by 2018, including 200,000 from Audi. It is the same time frame in which VW has pledged to become the world’s largest automaker. Last year, VW’s U.S. sales totaled more than 577,000, including 139,310 for Audi.

The new plant in Mexico is also part of the automaker’s plan for Audi to reach annual global sales of more than 2 million by 2020 with the aim of snatching the luxury crown from BMW globally as well as challenging its luxury rival and Daimler’s (DAIGn.DE: Quote, Profile, Research, Stock Buzz) Mercedes-Benz in the U.S. market. BMW and Mercedes have had production footprints in North America since the 1990s and each sell about twice as many cars in the United States as Audi.

Access to the lucrative U.S. market isn’t the only draw though as Mexico has 12 free trade agreements with 44 countries, while the United States’ 14 trade deals cover only 20 countries. Xavier Mosquet, leader of Boston Consulting Group’s automotive practice, said Mexico was the “better choice” over the United States for exporting to the rest of Latin America.

Also in Mexico’s favor are the rising labor costs in China, lower transportation costs and even Mexico’s own growing economy, industry officials and analysts said.

In 2010, Mexico’s total compensation per worker was $3.94 an hour, said Kristin Dziczek, director of labor and industry at the Center for Automotive Research, citing Bureau of Labor Statistics data. That compared with $3.45 in China, $34.59 in the United States and $52.60 in Germany.

And the Mexican work force is increasingly well educated. Audi officials say 2,500 applicants, many with degrees, have expressed interest in the 3,800 jobs they will have at the San Jose Chiapa plant and they haven’t even advertised the jobs yet.

Nomura said last August that Mexico could overtake Brazil as Latin America’s top economy as early as 2022. Mexico’s annual economic growth is projected to increase 4.5 percent in that period, up from 2.1 percent annual growth from 2002 to 2010.

Mexico also serves as a natural hedge for many foreign automakers against stronger currencies at home or disasters like the tsunami in 2011 that hurt the Japanese automakers, IHS analyst Guido Vildozo said.

“It’s probably one of the reasons why you’re hearing that some of the other automakers are also kicking the tires,” he said.

(Reporting by Ben Klayman in Puebla, Mexico; editing by Gunna Dickson)

GM shares rose 3.6 percent to $31.27, near their initial public offering debut of $33 in the fall of 2010, and hit the highest point since July of 2011.

The increase is welcome news for GM’s largest shareholder, the U.S. Treasury, which acquired its stake after a taxpayer-funded bailout. Treasury, which says it will sell its remaining position over the next year, gains almost $250 million (£160.9 million) for every $1 increase in GM’s stock price.

“GM, while still beset with issues, is generally executing better than investors give it credit for,” Barclays analyst Brian Johnson said in a research note.

The company still expects to return to breakeven by mid-decade in Europe, where it has reported 13 straight years of losses, said GM Chief Financial Officer Dan Ammann.

RBC Capital Markets analyst Joseph Spak welcomed the results, pointing to the company’s ability to cut costs.

“Better-than-expected results (in Europe) will be well received, giving investors confidence that progress is being made and breakeven by mid-decade is possible,” he said in a research note.

GM’s smaller U.S. rival Ford Motor Co (F.N: Quote, Profile, Research) last week posted a stronger-than-expected first-quarter profit on strength in North America, but overall costs spiked as it took steps to reinvest in its global lineup and shore up European operations.

About $225 million in higher structural costs in the quarter stemmed from Ford’s efforts to fix the European business after an economic downturn hit consumer demand for new cars.

‘TOO SOON TO CALL A BOTTOM’

Ammann said GM doesn’t see any signs of a turnaround in Europe. “It’s too soon to call a bottom in Europe.”

Ford officials have said the European auto industry may see some stabilization toward year-end or early 2014.

GM’s first-quarter net income attributable to common stockholders fell 13.5 percent to $865 million, or 58 cents a share, from $1 billion, or 60 cents a share, in the year-earlier period. The company took a $400 million hit to earnings due to falling prices for its vehicles and weaker volume.

The latest quarter included a $162 million noncash charge for the devaluation of the Venezuelan currency.

Excluding one-time items, GM earned 67 cents, topping the analysts’ estimate of 54 cents, according to a poll by Thomson Reuters I/B/E/S.

“We are much more of a formidable competitor now than we have been in more than a generation,” Chief Executive Dan Akerson said on a conference call.

Revenue fell 2.4 percent from last year to $36.9 billion, and was just above the Wall Street target of $36.6 billion.

GM’s North American unit reported operating profit of $1.41 billion, better than the Wall Street estimate of $1.21 billion, according to FactSet StreetAccount. The result was down from a year ago due to higher costs from preparing plants for new vehicle launches, especially the redesigned Chevrolet Silverado and GMC Sierra full-size pickup trucks, as well as lower shipments because the plants were down.

The company also saw a $200 million drop in operating earnings as it was forced to offer pricing deals on its current large truck line ahead of the launch of the new models.

Analysts have warned that a weaker Japanese yen and deteriorating European market will likely lead to more competitive pricing in North America. Japanese automaker Nissan Motor Co (7201.T: Quote, Profile, Research) said this week it was cutting prices on seven models representing 65 percent of its U.S. offerings.

KEEPING COSTS FLAT

GM kept North American costs in the quarter flat, which was better than anticipated. In January, company officials said costs would increase this year.

GM officials said while most of the expected increase in costs in North America will occur in the second and third quarters because of the new-vehicle launches, it will benefit from higher prices and lower incentives associated with the new cars and trucks.

RBC’s Spak said the North American unit’s 6.2 percent profit margin was stronger than the 4.7 percent he expected. Ford had a North American margin of 11 percent in the quarter.

GM’s loss of $175 million in Europe was smaller than the $469 million loss Wall Street estimated, according to FactSet.

In the region, GM cut $300 million in costs and was able to keep the pricing on its vehicles unchanged, both better than anticipated.

Ammann said GM will see cost savings in Europe slow as the year progresses, and Edward Jones analyst Christian Mayes said fixing its European operations will be “a long slog.”

Morgan Stanley analyst Adam Jonas said in a research note that it was the first time GM’s Europe unit topped Wall Street expectations in nearly two years and the first year-over-year improvement in results in five quarters.

The international unit, which includes China, had an operating profit of $495 million, while South America recorded a small $38 million loss. Both results were weaker than expected.

Ammann said strong results in China were offset by weakness in the rest of the international operations. He said the South America business is expected “to build” this year on last year’s profit.

GM said adjusted free cash flow in the quarter was a negative $1.3 billion due mostly to the lower earnings and timing-related items that it said would reverse during the rest of the year.

The Detroit automaker ended the quarter with total liquidity of $35.3 billion in its automotive business.

Treasury officials declined to say whether the rise in GM’s stock price could accelerate the sale of its remaining stake. According to GM’s proxy, Treasury still owned more than 241 million shares as of April 17, so it would need to sell at an average of about $79.03 a share to break even.

Federal officials said last week that Treasury had recovered about $30.4 billion of its investment in GM as of the end of March. In January, Treasury initiated a prearranged written trading plan to sell the rest of the stake.

The government got an 18 percent GM stake following the $49.5 billion bailout in 2009.

(Reporting by Ben Klayman and Deepa Seetharaman; Editing by Jeffrey Benkoe)