What Exactly Does GMAC Do?

Edward Niedermeyer
by Edward Niedermeyer
what exactly does gmac do

As recently as a few months ago, GMAC was the largest auto lender in the United States. Automotive leases constituted over ten percent of their business. One credit crunch later, the Cerberus-owned financing company has almost completely stopped writing car leases, which now account for only two percent of GM’s new car sales. And though such depreciation machines as Chrysler have stopped leasing altogether, leases still make up some 12 percent of the American new car market. Automotive News [sub] reports that GM Marketing Maven Mark LaNeve wants GMAC to loosen up its leasing policy– a move the GMAC boys view as about as desireable as Thunderbird wine. Until bailout bucks stabilize credit markets, bundled auto lease paper will continue to be ignored by investors. And that means GM is at the mercy of its once-captive finance company. Moreover, thanks to GMAC’s private ownership, there’s no telling what the status of its lease and loan holdings are currently, particularly for its ResCap mortgage arm. With GM insisting that GMAC get back its leasing religion, the two firms seem locked in a death-embrace. GM needs leases to move product, and doesn’t mind offloading the risk on its former subsidiary. Until GMAC goes down of course. In that scenario, GM will have far more to worry about that leasing volume.

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  • Yankinwaoz Yankinwaoz on Oct 06, 2008
    GM Marketing Maven Mark LaNeve wants GMAC to loosen up its leasing policy Of course he does... It's not his or GM's ass on the line if they do.

  • Ihatetrees Ihatetrees on Oct 06, 2008
    Deepsouth: A 25 year GMAC employee told me in confidence a few days ago that he wanted to retire in 5 years. This is what stunned me…” I sure hope we last that long.” I long ago lost my ability to be shocked at the myopia of domestic auto workers. And while I have some love for certain GM/Ford vehicles, I wouldn't buy anything they make new or warranty.

  • Under_the_Bus Under_the_Bus on Oct 06, 2008

    GMAC's job is to lose money.

  • Jberger Jberger on Oct 07, 2008

    Scott, Owning a business does not make you rich, it makes you work your ass off. The reason many businesses choose to lease, rather than buy, is to avoid being trapped into stupid depreciation rates which reduce the businesses flexibility. Imagine if you have a fleet of purchased trucks and are locked into a depreciation schedule that forces you to keep them for years, but gas doubles or triples in price after the purchase. (Never gonna happen, right?) The surge in gas prices is tripling the costs of running the fleet, and putting a real crimp in cash flow and margins. Your competitor leases his trucks for 2 years at a time, so he can "opt" out of the present trucks in another few months and move over to say a Sprinter that gets 3x the mileage of the existing trucks. Business leases are more about flex, cash flow and depreciation advantages than bottom line costs. Wanna deliver another blow to the economy? Kill leasing and force everyone to purchase, then see what happens to the Medium and Heavy Duty Truck market.