GMAC Gets $5 Billion Cash Infusion as Auto Bailout Expands
GM's financing arm, which has been flirting with bankruptcy, said it would ease lending restrictions
The Treasury Department will infuse another corporate giant with cash to stave off bankruptcy, announcing last night that $5 billion will go to GMAC, the financing arm of General Motors.
The money comes from the $700 billion in federal bailout funds. On top of the $5 billion, which will purchase preferred shares in the company, the government will lend General Motors up to $1 billion so that it can invest more in GMAC.
The aid marks the latest effort to try to rescue the auto industry. Earlier this month, the government agreed to give auto giants General Motors and Chrysler $17.4 billion in emergency loans. Proponents have said that saving the automakers is key to bailing the country itself out of a deepening recession.
GMAC's teetering on the edge of bankruptcy would have created more problems for the troubled industry, as the firm provides financing for both GM dealers and GM customers. If GMAC had had to file for bankruptcy, General Motors itself could have been threatened.
For consumers, GMAC's infusion of cash means that a major venue of loans for auto buyers has been reopened. The firm announced that it will immediately start lending to customers it had previously turned away.
Last week, the government allowed GMAC to become a bank holding company—a move that gave it access to the $700 billion in the Troubled Asset Relief Program and paved the way for yesterday's announcement.
Despite the latest attempt to save GMAC, however, hurdles remain—including the firm's continuing dependence on a struggling General Motors.
Reader Comments
I am confused
How is it that they end up giving them the money even though congress rejected it earlier, I thought that that meant it would die and they wouldn't speak of it again unless a whole new proposal was brought up. This is just terrible.
Auto/UAW Bailout
Living in Detroit
50 something retired UAW employees make more per annum than presently employed engineers at the Big 3. We are so tired of the “entitlement” attitude that, unless the UAW agrees to end the disparity, it will be a cold day (Florida) before we ever buy another Big 3 vehicle. This entire GM Bailout has exposed the ridiculous benefits these UAW people enjoy. A Jobs Bank that pays 85-100% of pay-what makes them think they deserve so much more than the unemployment benefits the rest of American workers qualify for?
Further, if the incoming administration merely absorbs the inflated pension costs of the UAW and socializes them onto the back of the American Taxpayer in order to relieve GM Chrysler and Ford of the burden instead of demanding modifications the automakers themselves have been too timid to demand for current and retired UAW members, then I truly believe the American Taxpayer will handle it by refusing to buy the cars.
The taxpayers are watching and they aren’t happy. Unlike the with the banking fiasco, the consumer gets the last word on the Auto/UAW bailouts via the wallet this time. Hopefully, the company heads and the UAW leaders realize they must appease not only the Government but also those they expect to continue to purchase their product. Thus far, I haven’t seen evidence of that understanding……..put more plainly…you are negotiating with the people who you are trying to sell automobiles. Act like it or suffer the consequences.
Everyone Should See This-UAW exposed at Ford/The Bosses at Work
Rampant Fraud
http://www.clickondetroit.com/video/15908257/index.html
Yet Another Bailout???
So I guess we've abandoned the idea of making capital available for loans via banks in favor of bailing out every corrupt, irresponsible business in America, one by one so only individuals are required to file bancruptcy any longer??? So much for rewarding incompetency!!!
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