GMAC Runs Out of Gas

Robert Farago
by Robert Farago
gmac runs out of gas

Bloomberg reports that GMAC has sent “Dear John” letters to an unspecified number of GM dealers. One of the missives informs GM stores that the captive financier will no longer provide them with financing to buy vehicles. “Turbulence in the markets reduced our access to funds and increased the cost of funds where available,” GMAC Chief Executive Officer Al de Molina explains. “In response, we adjusted our credit policy to reflect the reduced level of funding availability.” GMAC has also sent notification to other dealers– which could include some of the previously mentioned ones– that the franchisees will have to start repaying their loans after financed vehicles have been on lots for 180 days. Hang on; is this part of a conspiracy by GMAC’s majority owners– Chrysler-owners Cerberus Capital– to force GM to buy ChyrCo? No se. Meanwhile, more details on the changes after the jump. Meanwhile, bye-bye GM dealers. “You’re increasing their payments or you’re taking away financing altogether for a lot of dealers, which basically has the effect of shutting many of them down,” said Denny Fitzpatrick, chairman of the California New Car Dealers Association and Fitzpatrick Chevrolet Hummer in Concord, California. “Dealers just don’t have that cash lying around.”

“Under the new arrangements, [GM] dealers in November will be required to begin paying down their principal balance on the loans at a rate of 5 percent monthly for 2008 models and 10 percent monthly for 2007 vehicles, according to the letters. GMAC said it will also cut the size of the loans to dealers for used vehicles to between 70 percent and 90 percent of the cost, starting Jan. 1. The lender will require 30 percent of the initial advance to be paid off by the sixth month the vehicle is on the lot. After six months, it expects full payment, GMAC said.”

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  • Xennady Xennady on Oct 31, 2008

    If getting rid of dealers was this easy why the heck wasn't GM doing this years ago?

  • Lynn Ellsworth Lynn Ellsworth on Oct 31, 2008

    As one economist said, "we in the U.S. can't continue to borrow money from China to buy 70% of our oil from other countries and then just burn the oil sending the carbon up into the air." Actually we can't continue to do any one of those 3 things even by itself: 1 borrowing, 2 spending, or 3 polluting. Consequently our 2.8, and our whole society, is going through extremely exciting/scary/wonderful/horrible/mind boggling changes. Day after day I read the news and rumors here on TTAC with absolute amazement. Thank you for reporting things I never could have imagined. GM selling 51% of GMAC to a competitor and now getting cut off - incredible.

  • CoastieLenn They absolutely should.
  • Arthur Dailey Thanks for the clarification.@JeffS has nicely summarized most of my original comment.I greatly dislike the 'touring' light treatment. It seems like we all do. This generation of Mark is too short to pull off the continental hump and fake engine vents. With them the proportions look odd.As Corey so nicely put it 'disco was dead and so was its car'. Successive generations generally reject the vehicles that their parents drove (or drove them around in). And as the children of Boomers grew, the Boomers gave up their PLC's and rather than turning to station wagons to transport their growing brood turned to the newly available minivan.And the generation behind them, rather than aspiring to a PLC, instead leased 'German driving machines'.
  • SCE to AUX "Toyota has dropped a pic of the next Tacoma on Instagram."This is why the splashy auto show reveals are dead.
  • Sckid213 I feel like the Camry in Japan is what oddballs like the Kia K9 and Hyundai Eqqus felt here. Obviously those were higher-end vehicles than Camry, but they felt like they were in the wrong dimension here in the U.S.
  • FreedMike The Falcon was fast and temperamental. Is Ford sure this is what it wants to advertise?