GMAC Teetering on the Edge of C11

Robert Farago
by Robert Farago
gmac teetering on the edge of c11

As GM’s “captive finance unit,” as a division in which GM still holds 49 percent, GMAC’s arterial spray of red ink is causing all kinds of “challenges” for The General. For one thing, GMAC has been forced (by its own profligate ways) to raise floorplan costs to beleaguered dealers, driving a large number of said stores to the wall. And that’s just the good news. The bad news for the lender– whose ResCap mortgage unit wrote enough bad paper to Christo Rhode Island– is very bad indeed. “While Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke try to sell the [$700b bailout] package to Congress, Detroit-based GMAC is burning through cash and its bonds have fallen to a record low,” Bloomberg reports. “The biggest drain is GMAC’s Residential Capital LLC home-lending unit, which lost $1.9 billion in the second quarter — 2-1/2 times more than the auto loan unit.” The situation’s so bad, Mortgage Banking Solutions’ David Lykken’s almost been reduced to swearing. “Internally, everyone’s got to be hoping like heck they make it into the bailout program. That is probably the only option they have at this point.” Meanwhile, GMAC is more or less out of the leasing game, and GM can’t depend on them to offer zero percent financing to anyone with a pulse anymore. Hoisted. Petard. Own.

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4 of 19 comments
  • KixStart KixStart on Sep 26, 2008

    Cicero, I note that the "H" key is very, very close to the "B" key. And I further note that, while the quality of information at this site is mighty fine, the proofreading is somewhat lacking.

  • HEATHROI HEATHROI on Sep 26, 2008
    We are still, after all, a capitalist society. Matt how can you tell? speaking of toxic waste,with the Government offering to take your umm "effluent" in exchange for somewhat better effluent in the shape of treasury bonds - suddenly there is money in effluent and the ResCap handed to the feds to 'administer". GM breathes again..... for another month.

  • Robert Farago Robert Farago on Sep 26, 2008
    The situation’s so bad, Mortgage Banking Solutions’ David Lykken is using the “H” word. “Internally, everyone’s got to be hoping like heck they make it into the bailout program. Heck. The "H" word is heck. I'm making fun of the fact that he said heck instead of Hell. Anyone talking about such a large crisis-- ah, forget it. Text amended.

  • Rohman Rohman on Sep 27, 2008

    "Heck" is where you go if you don't believe in "gosh".