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 GMAC LLC is reportedly tightening its lending standards to the point where a large swath of General Motors Corp. customers may be unable to get financing to buy cars. Might this be part of GMAC's partial owner Cerberus Capital Management LP's efforts to strong-arm GM back to the table to discuss a deal to swap GMAC for Chrysler LLC?
GMAC allegedly has stopped lending to anyone with a credit score under 700, which would exclude about half of the country. More importantly, most customers of GM's largest brand, Chevy, reportedly sport scores in the 600 range, noted a Wall Street Journal story. Additionally, GMAC funded 43% of all GM sales in the second quarter, but only 20% of funding in September, notes Bloomberg. GM isn't taking this lying down. Instead, it has prepared a campaign to help its customers locate financing from 100 different sources. However, the effort isn't likely to be as simple for dealers and customers as working directly with GMAC. Additionally, some of the names on the list are likely to be foreign to most buyers, and may put them off. While GMAC claims the reason for the move is because of the frozen credit markets, its timing seems curious. After all, it seems Cerberus is desperate to dump Chrysler, and has talked with any automaker willing to listen in the last few weeks. Parties who reportedly sat down with Cerberus not only include GM, but also Nissan-Renault, Fiat and Tata Motors, which recently bought Jaguar and Land Rover. However, response reportedly has been tepid. But with GM, Cerberus has an attractive tool to get the carmaker to the table, GMAC. GM can free itself from GMAC's losses if it simply trades its stake in the finance company for Chrysler. Additionally, Chrysler has cash on its books that GM could use -- assuming it doesn't have to disperse it (either as payment or through litigation) to Chrysler dealerships when they are shut down. However, that's the catch for GM, integration. GM already has too many brands (as evidenced by its attempts to sell Hummer), and Chrysler will offer three more including the truck-heavy Jeep and Dodge brands. But, the alternative could be worse. Should GMAC fall into bankruptcy, then it could be stuck with some of the bill -- much like its circumstance with Delphi Corp. - Matthew Wurtzel CategoriesComments
From: wolfey,
This is what I call a directed hate swap. Cerebus hates chrysler, and GM hates it's liability from GMAC mortage liabilites, but GM hates chrysler more. Unfortunatly the three headed hound dog is showing its teeth and letting GM know who their real daddy is in their time of need. Cerebus holds the keys to the castle. Cerebus controls the funding of 50% of GM's freshly built cars by means of dealers floor planning with GMAC that Cerebus owns controlling interest of. GM has to take the deal no matter what, the only thing that could stop this cramed down hate swap is a sudden GM bankruptcy so that a judge could look at how roughly cerebrus is literally bullying General Mopar into a bad deal for GM. But after all, what do they really have to loose? They loose in one quarter as much as their entire market cap is, so it's just a big ol hate swap, cluster f*c# anyway. It's bailout or bk for the general, might as well be general mopar. Bigger they are, the harder it can be to let them fall.
Posted on:
October 18, 2008 11:26 PM
From: Tombstone,
Whatever the outcome is;those of us who hold GMAC stocks,& bonds will be the real losers.Sometimes I feel that the entire worls is going to hell........
Posted on:
October 22, 2008 10:36 AM
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GM would be stupid to completely get rid of it's financing arm. If you look at previous financial statements GMAC was the income for GM for many years. The Cerberus deal allowed for GMAC to purchase GMAC back at a future date and they would be wise to do so. Cerberus is sending much of the jobs at GMAC overseas (India/Phillipines). I don't think it would be right for the government to use US taxpayers money to "bail out" a company that is send our jobs overseas.