There is new trouble brewing in an important part of GM’s business: Ally, the former GMAC. Nearly 75 percent of the credit that GM dealers in the United States use to finance their inventories is from Ally, says a Reuters report. The report also says that Residential Capital (ResCap) – Ally’s mortgage servicing and lending unit – is again on the verge of being put into bankruptcy.
Ally still owes the U.S. Treasury Department about $12 billion. GM and Chrysler, two key sources of customers, are increasingly reluctant to steer business to it, says Reuters. This puts Ally deeper into trouble.
ResCap faces litigation over underwriting standards. The suits could bring a new set of liabilities that threaten to take Ally down with it unless it is somehow separated. According to Reuters, ResCap is seriously considering filing for bankruptcy by May 14 when it must repay a portion of its debt.