GM's Not Worried About GMAC
According to The New York Times, GM has confidence that Cerberus will fix GMAC. GM CFO Fritz "What Me Worry?" Henderson played down Cerberus chairman Stephen Feinberg's recent warning that "things could get a lot worse" at the finance company. While acknowledging GMAC subprime mortgage market struggles (how could he not?), Fritz believes GMAC has the cash reserves to see them through the current crisis. More to the point, GM's Chief Beancounter says GMAC won't need additional cash from GM. In fact, "We expect that GMAC will turn a profit in 2008." (That's three years before Fritz' predicted return to profit for GM.) Fritz didn't comment on Standard & Poor's recently GMAC and ResCap downgrade, which lowered both to junk-bond status, raising their cost of borrowing. While the storm clouds gather over the troubled lender, GM is doing what they can to help GMAC return to profitability: continuing to offer zero percent financing on a number of vehicles. We'd appreciate a heads-up from our dealer readers as to whether or not they've tightened credit requirements for these killer deals…
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Robert: Agreed, They are in trouble but, the $64,000 question is just how bad is it? As I understand it, the reason for the S&P downgrade was due to the fact that ResCap cannot let their net worth fall under $5.4 billion. As of December it still had a net worth of $6 billion. (not much of a cushion there) Additionally, I think Cerebus is speaking with a forked tongue because they have stated that they expect them to be profitable in 2009. This just adds to the frustration with GM's financials. It's becoming increasingly difficult to pin down their financials. Gawd knows I've tried. (I'm also not a financial expert) Just when you think they run out of cash, they seem to pull out wads of cash their matress. You have to wonder if they have their own printing press?
GM has been selling off the crown jewels for cash- GMAC was certainly the crown jewel for many years. The question is how many crummy loans GM has pushed to move stuff off the lots. Making a zero percent loan to someone of questionable credit will create a sale in the short term but a problem in the long term. I agree that the true financials are difficult to pull out but witha corporation of this size there are hidden assets as well as hidden liabilities . Pan Am survived a whole extra decade by selling off it's hidden assets- routes, gates, planes, catering operations, hotels, etc.
GMAC has tightened up just a little but the non captives are being more conservative and new sales are really sucking right now.
I'm at a Pontiac/GMC/Buick point and if it not for used cars we would be in a world of hurt as the ratio is 65 used and 15 new as of today and we have sold only 1 new GMC pickup all month and about half of the new are fleet and commercial sales not John Public, its getting rough.
The up side is used vehicles are profitable and new are not. If you are selling new its easier just to lay down and take your $75.00 dollar commision and go back to the used side.I have seen Acadia sales going into holdback and Enclaves at invoice to $500.00 over
GMAC approves all auto loans based on a tiered credit rating. The grades run as follows; S, A, B, C, D and E tiers. Others are simply turned down. Basically, all but D and E approvals qualify for special incentive rates (0% for example). D and E approvals will qualify at a higher rate (8.9%). Each application is scrutinized by money down, equity or non equity in trade, consumer's pay history, etc. I can't honestly say that GMAC has become much more selective in purchasing contracts. I can assure you that they will turn down credit criminals absolutely. They used to have what was commonly called "buy a bum" weekends once or twice a year. They no longer hold these events.