By on December 15, 2008

According to Yahoo! Finance, “General Motors Corp. said in a regulatory filing Monday [full text after the jump] that it and GMAC LLC agreed to temporarily adjust the financing company’s terms for making advance payments to the automaker for the wholesale financing of vehicles sold to GM dealers.” Zooming in… “GMAC typically pays GM the invoice amount for each vehicle shipped by the automaker to a GMAC-financed dealer on the first business day following the vehicle’s shipment.” Closer… “Under the deal, GMAC won’t be required to pay the invoice amount until that amount is due from the dealer, which will allow GMAC to defer payment of up to $1.5 billion in cash due to GM until Dec. 30. GM will have a security interest in the financed vehicles during the shipping period.” Holy brink of bankruptcy Batman! Clearly, GM intends to use federal bailout bucks– should there be any– to prop-up GMAC. Never mind that, this move virtually eliminates GM’s cash flow (such as it is). I mean, GM won’t get paid for these vehicles in months. If ever. And if GMAC is down to its last $1.5b of liquidity, this little paper shuffling exercise ain’t gonna save nothin’. Bye-bye GMAC, arrivederci GM. Drink up lads. Last orders.

ITEM 8.01 Other Events

On December 9, 2008, General Motors Corporation (“GM”) and GMAC LLC (“GMAC”) agreed on a temporary basis to adjust GMAC’s terms for making advance payments to GM for wholesale financing of vehicles sold to GM dealers. GM typically has an increase in its inventory levels in advance of the year-end shut down and this adjustment will help finance purchases of this inventory. Ordinarily, GMAC pays GM the invoice amount for a vehicle shipped by GM to a GMAC financed dealer on the first business day after the shipping date. Beginning on December 9, 2008, GMAC will be obligated to pay GM the invoice amount when such amounts are due from dealers. As a result of this change in payment terms, GMAC will be able to defer payment until December 30, 2008 of up to $1.5 billion in cash due to GM. During the shipping period GM will have a security interest in the financed vehicles.

[thanks to Uncommon Sense for the link]

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10 Comments on “GM Falls on Its Sword to Rescue GMAC...”


  • avatar
    volvo

    Robert

    Snow, Paulson, Goldman Sachs, Cerberus. Pretty tight circle of relationships. This little puppy has its heads in a lot of food bowls.

    Tinfoil hat time.

    On April 3, 2006, GM announced that it would sell 51% of GMAC as a whole to a consortium led by Cerberus Capital Management

    On October 19, 2006, John W. Snow, President George W. Bush’s second United States Secretary of the Treasury, was named chairman of Cerberus.

    It was revealed on October 10, 2008 that GM may exchange its remaining 49% stake in GMAC to Cerberus.

    Could be a pretty cute way to funnel taxpayer bailout money indirectly from the treasury to Cerberus.

    Gotta hand it to that multitasking puppy. Between his 80% stake in Chrysler and whatever stake he ends up with in GMAC he probably will see a lot more of the bailout money than the UAW does. That doggy will be eating sirloin steak at feeding time.

    It is good to be king.

  • avatar
    porschespeed

    Volvo,

    Are you trying to imply that a bunch people who know each other, will do deals that help each other and their respective companies out? Especially with hundreds of billions of dollars that they got from the Feds?

    Good golly, Beav! That’s not the American Way!

    Oh wait…

  • avatar
    Lichtronamo

    Not only does this look like a shell game to help GMAC stay afloat, but also looks like its intended to aid GM in shifting some of its bloated inventory from its books to dealers. Chrysler isn’t the only one playing the sales bank game again.

  • avatar
    bluecon

    Bush will somehow get GM enough money to keep GM in business until President Elect BO is in office than it will be payola time. GM will receive tens of billions and everyone from the bigshots to the union people on the floor will get nice golden parachutes and the taxpayer will be left with the bill.

    The Big 3 are not viable companies without a restructuring and CH11 will be a last resort after the tens of billions are long gone.

  • avatar
    rcguy

    This is the type of slight of hand trick that GM has been doing under the Wagner era. Sometimes it’s pointless, and other times illegal and costly.

    For example, in Oshawa the management tries to squeeze out the most units they can at the end of the month even if they need to work overtime to reduce the float. This makes the numbers look better for the month ending by stealing units from the next month.
    When bean-counters run the show, it’s always about the numbers.

  • avatar
    russification

    I am always put off by the glib indifference of humor that stalks the acrimonious misfortune of people who have really supplanted their lives into honest livings. So I cant look at this GM situation without thinking criminally about it.

    My understanding is that the cars are insured for wholesale price before they get sold to consumers so getting a few fundamentalist muslims to molotov cocktail the next batch of cadilacs to get some insurance doe doesnt seem to be a realistic option.

    Ive also been told GMAC makes most of its money through financing mortgages and not cars, and judging from the bailout of the bad mortgages these banks just got to dump onto the governments books does not bode well with me either.

    Like most patriotic and idiotically duped americans who would like to see a national institution persevere through this storm, its hard to see how that can happen with little or no consumer credit available, either in home equity or gainful employment accross the lower 48.

    Perhaps the UAW could be recruited into my new terrorist gang to drag the corporate scalpers from their cars and force them to sell their holdings onto the market to keep the dow above water and float a few retirements to maturity.

    I know its harsh sounding but it looks to me like the time value of the dollar has been embezzled long ago and the endgame bailout process is a further extension of that philosophy and white collar crime. There is no future taxpayer ability to pay down the national deficit or the bailout of any of these automakers. Without acknowledging this fact, how can bankruptcy attorneys be realistically negotiated with?

  • avatar
    Robert Frankfurter

    The Bush & Cheney gang will surely funnel as usual the dough to their buddies and there are more tricks from the shoe getter club to come.

    That all may seem by todays standard a huge sum & undertaking – but wait till first quarter 2009.

    “You haven’t seen anything yet”

    What we see today in problems for the car industry
    (that the market simply dont need that many, good or bad cars, that are currently produced is simply a market oversupply and a personal underfinancing)
    attempted bailouts is peanuts compared whats up.

    The worst is still to come.

    Latest Feb 2009 Obama e.g. the USA gets a real problem,

    When the first credit card companies (now as clever as hastily converted to banks to have easier access to governments bailouts) declare they are bankrupt (in fact they where since years but could swindle through), the other big credit card lenders will follow.

    And then Freddy Mac & Fanny May will seem in comparison a successful business.

    Any bets?

  • avatar

    This wide-scale bloodletting will probably create the single biggest buying opportunity of stocks & distressed properties for the next 12 years.

    -It will Define the reason you keep cash on hand & occasionally take a little profit so you can buy good stuff on sale in bad markets, when there’s blood in the streets and people are fearful.


    +This VF article is written in a style so unnecessary it’s almost disgusting; –but interesting if you filter out the 85% vapid fluff: http://www.vanityfair.com/magazine/2009/01/wall_street200901?printable=true&currentPage=all

  • avatar
    chuckR

    The Bush and Cheney gang – do you mean Barney Frank, Chris Dodd and Franklin Raines? Pigs both red and blue have fed at this trough. If you don’t like it, vote anti-incumbent.

  • avatar
    CarnotCycle

    The Bush and Cheney gang – do you mean Barney Frank, Chris Dodd and Franklin Raines? Pigs both red and blue have fed at this trough. If you don’t like it, vote anti-incumbent.

    Yes, when you look at the developments over a long span of time that led to these dark financial days (it took awhile to pull enough oranges out of the stack so it would fall) it most definitely is a bi-partisan effort.

    An excellent microcosm of how bi-partisan it is can be summed up in one firm: Goldman Sachs. That outfit has basically supplied ~75% of our Treasury secretaries through both quite partisan Republican and Democratic administrations.

    And no one can deny Goldman Sachs has enjoyed that connection, as evidence number one I point to the exhibit of its continued existence despite being one of the most adventurous firms when it came to appetites for exotic (read: stupid) financial products with no due diligence on the securities they were buying.

    Oh, and if you’re net worth is less than at least $1 million (liquid net) or you don’t have an Ivy League diploma (Harvard is an extra point by itself) you don’t get in the door at Goldman. Only pigs that walk on two legs (all the better to get in the trough) need apply for an account at Goldman thank-you. An important caveat to being a commercial bank to glom TARP money? It doesn’t have to be a bank for anyone but rich guys. Awesome! Chartered FDIC-backed hedge funds at last!

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