End of Days: GM Vs. GMAC Vs. Toyota

Robert Farago
by Robert Farago

Let’s review. GMAC was GM’s “captive lender,” a wholly-owned subsidiary of the artist once known as the world’s largest automaker. You want a loan or a lease at a GM store? GMAC did the deal. It was a cash cow– until it started writing a lot of sub-prime/bad paper in both its automotive division (to keep GM’s cash flowing) and its ResCap mortgage unit (just ’cause it could). When GM CEO Rick Wagoner was looking for a way to keep his job (i.e. dress-up GM’s books with asset sales), he sold 51 percent of GMAC to Cerberus, a private equity group. [NB: Wagoner claimed that he did so to help GMAC’s credit rating. Yeah, that turned-out well.] Cerberus had recently purchased Chrysler, and Chrysler Financial Services. TTAC (and others) reckoned Cerberus would jettison Chrysler’s car-making ops (one way or another), combine GMAC with Chrysler financial and proceed with the business they know and love: finance. When the shit hit the fan for Chrysler– about ten minutes after Cerberus bought the company– Cerberus tried to swap Chrysler for GM’s remaining share of GMAC. Uncharacteristically, GM said no to a stupid idea. When the things got REALLY bad, Cerberus tried to sell ITS share of GMAC BACK to GM. Again, GM passed. And then things got worse…

When GMAC took a bath on leasing, it raised its rates and, effectively, got out of the business. This didn’t help GM. Now that “normal” auto loans are also a drug on the market, Chrysler-controlled GMAC has decided to shore-up the sinking ship by tightening-up its credit requirements. Which won’t help GM. As in all the dealers are, out of necessity, switching out of GMAC to survive. BUT the damage has been done. While Toyota’s hyping zero percent finance deals, GM has developed a rep for not being able to offer people car loans. So…

GM has decided to promote the fact that GM customers can still get attractive finance rates… with someone other than GMAC. Automotive News [sub] reports the GM yes-you-can-still-get-a-deal’s going down. “General Motors, in the wake of lending restrictions by its partially owned finance unit, will begin an advertising campaign reminding consumers that they can still finance vehicles through GM dealerships. GM’s national dealer council learned about the plans during a 30-minutes conference call with GM officials today….

“The upcoming campaign puts GM in the position of steering dealer customers to financing channels other than its 49-percent owned GMAC affiliate.” Talk about splitting the difference between a rock and a hard place. If GMAC can’t get a hold of federal bailout bucks to save its skin, and goes belly-up, even GM’s 40 percent ownership is enough to take The General down with them. Correct me if I’m wrong.

Robert Farago
Robert Farago

More by Robert Farago

Comments
Join the conversation
2 of 12 comments
  • Campisi Campisi on Oct 15, 2008

    I've never bothered with financing a car before, but I was always under the assumption that it was smarter to get a loan through a bank or credit union anyway.

  • Ttilley Ttilley on Oct 15, 2008

    truthbetold37: My wife’s GM lease ran out and I had to replace her vehicle. Couldn’t lease through GMAC. Third party leases cost almost as much as buying. Ended up financing at our credit union at 4.5%APR. Was it a GM car? If it was then, at least in your case, this works for GM. If not, then not so much...

  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.
  • Ronin It's one thing to stay tried and true to loyal past customers; you'll ensure a stream of revenue from your installed base- maybe every several years or so.It's another to attract net-new customers, who are dazzled by so many other attractive offerings that have more cargo capacity than that high-floored 4-Runner bed, and are not so scrunched in scrunchy front seats.Like with the FJ Cruiser: don't bother to update it, thereby saving money while explaining customers like it that way, all the way into oblivion. Not recognizing some customers like to actually have right rear visibility in their SUVs.
  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
Next