The $5 billion investment in GMAC has already been completed. For example, only about $162 billion from the $250 billion that was set aside in October for investment into the banks has been spent.īut the official added, “it’s clear that Congress will need to release the remainder of the TARP.” Under the law governing the program, the administration must ask Congress for the second half of the funds and Congress can vote to block their release.Ī Treasury official said the financing for GMAC comes from the first $350 billion, since not all of the allocated funds have been spent yet. The $6 billion in total assistance means that Treasury has now committed more than the first $350 billion from the $700 billion bank rescue program. The Treasury did not require that GMAC engage in more lending as a condition for receiving the government investment, spokeswoman Brookly McLaughlin said. In exchange for the funding, the government will receive preferred shares that pay an 8 percent dividend and warrants to purchase additional shares in return for the money, the department said. In addition to the $5 billion for GMAC, the Treasury also will lend up to $1 billion to GM so that the company can purchase additional equity that GMAC is planning to offer as part of its effort to raise more capital. The automaker is also offering financing between 0.9 percent and 5.9 percent on more than three dozen other 20 models, including many trucks and SUVs. The Saab 9-3 and 9-5 sedans also qualify for zero-percent financing. GM said Tuesday that it will offer zero-percent financing for up to 60 months on the 2008 Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X sport utility vehicles. Mark LaNeve, GM’s vice president for GM North America vehicle sales, service and marketing, said GMAC’s $5 billion in loans was crucial for the company to afford the zero-percent and low-interest financing on some vehicles. “I don’t think business is ever going to be back to usual.” We just had a lending quagmire,” he said. “I’m a believer that we never had a big economic boom. Joe Piane, general sales manager at Ostrom Chevrolet in the Los Angeles suburb of Montebello, said his dealership’s sales had been “devastated” since mid-October, when GMAC’s lack of money prompted it to tighten credit.Īnd even if the credit crunch eases, Piane believes consumers will be less likely to spend money they don’t have. “These people are still customers and they’re still good people you want to help get into the right vehicle.” “They’re not lowering standards, they’re bringing more people into the game,” Cannon said of GMAC. Marc Cannon, a spokesman for AutoNation Inc., a Fort Lauderdale, Fla.-based auto retailer that encompasses 264 dealerships including 73 GM franchises, noted that consumers can faithfully pay their bills for years, but if they miss one or two payments along the way, their credit score can drop into the 600s. GMAC said today that as a result of the government aid it will resume offering automotive financing to customers with credit scores as low as 621, eliminating restrictions put in place two months ago as a result of the tight credit markets that mandated a minimum score of 700, an exceptionally good score. GM was among those worst hit, reporting a 41 percent slide for the month. Vehicles sales have declined sharply this year, plunging 37 percent in November to their worst level in more than 26 years, with every major automaker reporting a drop of more than 30 percent. Whether it’s just a euphoric feeling or not at least it’s a positive.” “People are saying it’s good to see GMAC back in the marketplace. “I think these things really spur consumer confidence too,” said Martin, who had already seen customer traffic pickup at his dealerships on Tuesday. Michael Martin, who owns Chevrolet and Saturn brand dealerships in Manassas, Va., said he thinks the loans will be key to turning around the auto industry, adding that GMAC’s loosening of credit sets an example for banks that have yet to use their bailout funding to free up consumer loans. The GMAC funding, on the heels of the $17.4 billion automaker bailout approved by the Bush administration earlier this month, gives some relief to auto dealers who had blamed the industry’s steep drop in sales partially on a lack of affordable credit. Today, Detroit-based GM said it will offer zero percent or low-interest financing on some slower-selling 20 models as part of a year-end sales push - a move made possible by the newly available cash at the financing arm. It’s the first time that a financial institution has said it will use money from the $700 billion bank bailout to offer more affordable credit to consumers. The struggling financing arm of General Motors Corp., rescued by $5 billion in federal aid on Monday, plans to use some of the money to make cars and trucks more affordable to a larger pool of customers.
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