In their latest report, the Congressional Oversight Panel suggested that GM’s formerly captive finance arm GMAC shouldn’t have been split from the automaker it still supports. If this led you to believe that GM would take the troubled finance firm back under its corporate wing, you have another thought coming. The WSJ [sub] reports that
The idea appealed to GM, in part because auto maker would have more control over lending practices. GMAC’s move in 2008 to dramatically restrict leasing amid the U.S. financial crisis helped trigger the spiral that sent GM into bankruptcy the last year… But taking over GMAC would have many complications. GM sold a majority stake in GMAC in 2006 as a way to buck up the auto maker’s credit standing and its access to capital. As it turned out, GM still remains largely cut off from the markets.
Where does this leave GMAC? In big trouble and and at the mercy of the taxpayers, apparently. The WSJ [sub] points out that GMAC’s ResCap unit remains the major stumbling block to a successful IPO for the firm. Other trouble points: GMAC’s decision to launch an online bank, called Ally. According to the CAP report, online banks “have not had a history of success.” Also, the possibility that GM could create a new captive-finance arm. If that happens, and since GMAC is struggling and GM won’t take it back it seems likely, GMAC’s consumer and floorplan financing could be stuck in the subprime ghetto, servicing such marginal automakers as Chrysler and Saab. That’s more bad news for the worst beneficiary of the Detroit bailout, and by extension, bad news for taxpayers.