End of Days: GM Vs. GMAC Vs. Toyota

Let’s review. GMAC was GM’s “captive lender,” a wholly-owned subsidiary of the artist once known as the world’s largest automaker. You want a loan or a lease at a GM store? GMAC did the deal. It was a cash cow– until it started writing a lot of sub-prime/bad paper in both its automotive division (to keep GM’s cash flowing) and its ResCap mortgage unit (just ’cause it could). When GM CEO Rick Wagoner was looking for a way to keep his job (i.e. dress-up GM’s books with asset sales), he sold 51 percent of GMAC to Cerberus, a private equity group. [NB: Wagoner claimed that he did so to help GMAC’s credit rating. Yeah, that turned-out well.] Cerberus had recently purchased Chrysler, and Chrysler Financial Services. TTAC (and others) reckoned Cerberus would jettison Chrysler’s car-making ops (one way or another), combine GMAC with Chrysler financial and proceed with the business they know and love: finance. When the shit hit the fan for Chrysler– about ten minutes after Cerberus bought the company– Cerberus tried to swap Chrysler for GM’s remaining share of GMAC. Uncharacteristically, GM said no to a stupid idea. When the things got REALLY bad, Cerberus tried to sell ITS share of GMAC BACK to GM. Again, GM passed. And then things got worse…

When GMAC took a bath on leasing, it raised its rates and, effectively, got out of the business. This didn’t help GM. Now that “normal” auto loans are also a drug on the market, Chrysler-controlled GMAC has decided to shore-up the sinking ship by tightening-up its credit requirements. Which won’t help GM. As in all the dealers are, out of necessity, switching out of GMAC to survive. BUT the damage has been done. While Toyota’s hyping zero percent finance deals, GM has developed a rep for not being able to offer people car loans. So…

GM has decided to promote the fact that GM customers can still get attractive finance rates… with someone other than GMAC. Automotive News [sub] reports the GM yes-you-can-still-get-a-deal’s going down. “General Motors, in the wake of lending restrictions by its partially owned finance unit, will begin an advertising campaign reminding consumers that they can still finance vehicles through GM dealerships. GM’s national dealer council learned about the plans during a 30-minutes conference call with GM officials today….

“The upcoming campaign puts GM in the position of steering dealer customers to financing channels other than its 49-percent owned GMAC affiliate.” Talk about splitting the difference between a rock and a hard place. If GMAC can’t get a hold of federal bailout bucks to save its skin, and goes belly-up, even GM’s 40 percent ownership is enough to take The General down with them. Correct me if I’m wrong.