Tag: GMAC

By on December 5, 2013

Renaissance Center

Ally Financial, the bank holding company formerly known as GMAC, is still a major part of the United States federal government investment portfolio in the five years since it was bailed out at the start of the Great Recession. Yet, it may be able to soon divest its ownership in part due to General Motors selling their remaining shares.

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By on April 15, 2013

8 years to pay off a car? A report by the Wall Street Journal claims that in Q4 of 2012, the average car loan stretched out to 65 months, or just over 5 years. Loan terms were being stretched out over increasingly longer terms too, with credit firm Experian reporting that nearly 1 in 5 car loans had terms between 73 and 84 months long, with some stretching for as long as 97 months.

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By on April 5, 2013

March was the 5th straight month of a SAAR above 15 million vehicles.  Industry analysts have explained the strength of the market in a number of ways. The need to replace older vehicles is one (new car sales were hit hard during the recession as consumers held on to their vehicles for longer. This also caused used car prices to skyrocket, something TTAC has been documenting), while others have cited increasing fleet demand, and the desire to replace vehicles damaged in Hurricane Sandy.

But one factor that is just starting to get attention outside of TTAC is sub-prime financing. Sub-prime lending, which involves giving high-interest loans to customers with poor credit scores, is driving the SAAR in a big way, by letting buyers with poor credit purchase new cars. In turn, the sub-prime bubble is being driven by Wall Street, whose clients cannot get enough of financial instruments backed by sub-prime auto loans.

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By on November 22, 2012

Bailed-out GM agreed to pay about $4.2 billion for the European and Latin American operations of likewise bailed-out Ally Financial, formerly known as GMAC. (Read More…)

By on May 8, 2012

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. (Read More…)

By on July 23, 2010

Now that GM’s acquisition of the subprime lender AmeriCredit has had 24 hours to sink in, howls of protest are starting to surface. The charge is being led by Senator Chuck Grassley, who has requested a review of the deal from the SIGTARP, saying

If GM has $3.5 billion in cash to buy a financial institution, it seems like it should have paid back taxpayers first.  After GM’s experience with GMAC, which left GM seeking a taxpayer bailout, you have to think the company and, in turn, the taxpayers would be better off if GM focused on making cars that people want to buy and stayed clear of repeating its effort to make high-risk car loans.

And though Grassley’s criticism could be read as mere partisan gamesmanship from a leader of “the party of no,” there are a number of very good reasons for opposing the deal.

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By on June 24, 2010


The WSJ [sub] reports that GM is officially looking outside of its former captive finance arm Ally Financial (formerly GMAC) as it seeks more subprime loan deals to drive sales volume ahead of its IPO. GM execs tell the WSJ that The General could do even better with an in-house finance arm, but that these deals will help. And, according to Experian Automotive’s Melinda Zabritski, GM needs the help because

By not financing [subprime] consumers, they are locking out about 40% of the U.S. population

GM’s restructuring consultants AlixPartners add that loyalty improves for customers who buy using a captive lender. The downsides? Higher default risks, the temptation to overload on incentives, and then there’s one more biggy…
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By on May 17, 2010

When we first heard that GM was eying a return to in-house financing, our first reaction was to worry that

the potential for falling back into old bad habits can’t be ignored.

Clearly our concern wasn’t wasted, as the AP [via Google] reports that The General’s major motivation for considering re-creating a captive lender is to chase subprime business its current major lender won’t touch. And considering that that lender is GM’s bailed-out former captive finance lender GMAC (now Ally Financial), which was badly burned by subprime mortgages, it’s not surprising that GM is frustrated by GMAC’s tentative approach. But should The General charge into the low-standard lending sectors where Ally fears to tread?

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By on May 13, 2010

News that GM is considering a number of options for a return to captive finance, has lit a fire under Chrysler CEO Sergio Marchionne, who tells the Detroit News that

One of the things that we do not wish under any circumstance is to have an uncompetitive relationship vis-À-vis GM

By on May 11, 2010

Three years after spinning off GMAC, with which it pioneered captive auto financing, General Motors may be considering a return to in-house finance. Bloomberg BusinessWeek reports that:

GM may buy back the GMAC business, start a new finance unit or form a partnership with banks and other lenders, said the people, who asked not to be identified because details are private. Chief Executive Officer Ed Whitacre wants to form an in-house lender before selling shares in GM as soon as the fourth quarter, one person said.

GMAC has received $17.2b in TARP aid, but recently announced a$172m Q1 profit despite concern over its bailout in congress. GM’s previous experience with in-house lending has been decidedly mixed: though GMAC was long a cash-cow for the automaker, the easy financing cashflow is said to have enabled a culture of apathy towards product development. When the credit market collapsed, GMAC went down like a ton of bricks… and would have taken GM (even further) down with it, had Rick Wagoner not spun it off and sold it to keep the lights on a little longer. In the short term, a captive finance unit might help a GM IPO, but the potential for falling back into old bad habits can’t be ignored.

By on May 8, 2010

Perhaps the most fundamental challenge facing bailed-out financial and auto firms is convincing consumers to leave aside their anti-bailout prejudices and start buying their products. For GM, the first step in this process was as simple as repaying a loan and airing a “Mission Accomplished” advertisement that did everything but show Ed Whitacre landing on an aircraft carrier. For GM’s former captive finance arm, GMAC, escaping the stain of the bailout is a more prosaic matter. Having already launched an online consumer-oriented banking arm by the name of “Ally Bank,” the finance company is adopting the innocuous Ally moniker for its entire business, reports the Detroit News.
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By on March 17, 2010

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.

(Read More…)

By on March 12, 2010

After three separate bailouts totaling over $17b, Congress is beginning to wonder if keeping auto-finance giant GMAC alive was worth it. Forbes reports that the Congressional Oversight Panel reckons at least $6.3b of that money could be gone forever, as GMAC flounders towards barely breaking even. And like the rest of the bailouts, the fundamental problem is that the influx of federal cash has allowed GMAC to pretend like it’s not struggling for survival. The panel report [full document in PDF format here] notes [via Automotive News [sub]]

Treasury’s previous and current support is not underpinned by a mature business plan. Although GMAC and Treasury are working to produce a business plan, Treasury has already been supporting GMAC for over a year despite the plan’s absence. Given industry skepticism about GMAC’s path to profitability and the newness of the non-captive financing company model, it is critical that Treasury be given an opportunity to review concrete plans from GMAC as soon as possible.

Sound familiar?

By on February 12, 2010

Having recently posted a nearly $5b loss, bailed-out auto finance giant GMAC says it needs more help from automakers to remain competitive. Automotive News [sub] reports that GMAC CEO Mike Carpenter told reporters that “the success of GMAC Financial Services hinges on more loan and lease subsidies from General Motors Co. and Chrysler Group,” and that “GMAC requires additional marketing funds from the automakers to provide competitive loans and leases to the GM and Chrysler dealer networks.” GMAC’s Chrysler business has nearly doubled in the last quarter of 2009, now providing about 26 percent of Chrysler’s retail financing and about 30 percent of GM’s.

(Read More…)

By on January 15, 2010

The TARP bailout of GM finance partner GMAC is being criticized by a congressional oversight panel [full report in PDF format here], reports the Detroit Free Press. The panel alleges that the Treasury

has not yet articulated a specific and convincing reason to support the company… It has never stated that a GMAC failure would result in substantial negative consequences for the national economy. If Treasury has made such a determination, then it should say so publicly.

(Read More…)

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