GMAC Granted Bank Status as U.S. Seeks to Save GM
Dec. 24 (Bloomberg) -- GMAC LLC won Federal Reserve approval to become a bank holding company, enabling the auto lender to tap U.S. financial industry bailout programs and help keep General Motors Corp. in business.
The Fed is using emergency powers to grant Detroit-based GMAC’s request because of the “unusual and exigent circumstances affecting the financial markets,” according to a statement from the central bank today. To comply with rules about who can own a bank, GMAC’s majority owner Cerberus Capital Management LP agreed to distribute its stake to its investors and minority owner GM will cede all control.
The Fed order said the plan “would benefit the public by strengthening GMAC’s ability to fund the purchases of vehicles manufactured by GM.”
Saving GMAC may improve the chances of salvaging GM, which received $9.4 billion in U.S. loans this month to stave off collapse at least until January. The package didn’t include support for GMAC, which finances about 75 percent of the inventory at GM dealers. The lender also served as a major source of loans to GM car buyers until it was frozen out of credit markets after losses totaling $7.9 billion.
GMAC’s survival “is critical to the future of the dealers,” said Kimberly Rodriguez, principal of Grant Thornton’s automotive practice, in a Dec. 19 statement on the bailouts for GM and Chrysler LLC. The lending arms of automakers “need to be able to finance GM and Chrysler dealers, and support vehicle financing to customers in order for the parent auto companies to be viable.”
