DETROIT — With the federal government almost certain to take control of GMAC Financial Services, analysts suggest it could become a loan machine that gives General Motors and Chrysler a huge advantage over their competitors.
The company was one of 10 financial firms ordered by the government to raise more capital after taking a stress test. In GMAC’s case, it needs $11.5 billion, and the most likely source is the government itself.
A government-controlled GMAC would have the power to offer low-cost loans to buyers of GM and Chrysler cars and trucks as a way of steering business to the troubled automakers.
"GMAC could become the Freddie Mac and Fannie Mae of auto finance. It would probably help sales of GM and Chrysler cars, but it also increases the risk of taxpayer loss,” said Bert Ely, a banking consultant in Alexandria, Va.
An advantage?
The Obama administration already owns 5 million shares of GMAC, which it got in exchange for a $5 billion bailout loan. And Treasury Secretary Timothy Geithner said Friday his department is poised to offer GMAC more help.
"We’re going to provide substantial support to GMAC,” Geithner said.
He said it was "likely” that GMAC will need more money from the government, "and we’ll be prepared to provide that.”
Chrysler LLC is already in bankruptcy, and General Motors Corp. is facing a June 1 deadline to finish a restructuring plan and avoid winding up in bankruptcy as well. U.S. auto sales are at a 27-year low.
The government could lean on GMAC to help stimulate sales with the cash to offer zero-percent financing, or lower credit requirements.
"Financing is critical to this process, and that requires that GMAC have the ability to provide loans that Americans need to buy cars,” Geithner said.
Turning GMAC into a government-funded finance arm for GM and Chrysler would give them a competitive advantage over Ford Motor Co. and perhaps other automakers, said Kirk Ludtke, senior vice president of CRT Capital Group LLC in Stamford, Conn.
by the associated press
The company was one of 10 financial firms ordered by the government to raise more capital after taking a stress test. In GMAC’s case, it needs $11.5 billion, and the most likely source is the government itself.
A government-controlled GMAC would have the power to offer low-cost loans to buyers of GM and Chrysler cars and trucks as a way of steering business to the troubled automakers.
"GMAC could become the Freddie Mac and Fannie Mae of auto finance. It would probably help sales of GM and Chrysler cars, but it also increases the risk of taxpayer loss,” said Bert Ely, a banking consultant in Alexandria, Va.
An advantage?
The Obama administration already owns 5 million shares of GMAC, which it got in exchange for a $5 billion bailout loan. And Treasury Secretary Timothy Geithner said Friday his department is poised to offer GMAC more help.
"We’re going to provide substantial support to GMAC,” Geithner said.
He said it was "likely” that GMAC will need more money from the government, "and we’ll be prepared to provide that.”
Chrysler LLC is already in bankruptcy, and General Motors Corp. is facing a June 1 deadline to finish a restructuring plan and avoid winding up in bankruptcy as well. U.S. auto sales are at a 27-year low.
The government could lean on GMAC to help stimulate sales with the cash to offer zero-percent financing, or lower credit requirements.
"Financing is critical to this process, and that requires that GMAC have the ability to provide loans that Americans need to buy cars,” Geithner said.
Turning GMAC into a government-funded finance arm for GM and Chrysler would give them a competitive advantage over Ford Motor Co. and perhaps other automakers, said Kirk Ludtke, senior vice president of CRT Capital Group LLC in Stamford, Conn.
by the associated press
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