(Recasts, adds details on potential impact on GM sales volume,
By Jonathan Stempel
NEW YORK Jan 2 GMAC LLC on Friday said that as
part of its $6 billion federal bailout and decision to become a
bank, it will no longer have the exclusive right to provide
low-interest loans to borrowers who buy General Motors Corp
(GM.N) cars and trucks.
According to a U.S. Securities and Exchange Commission
filing, GM may now offer incentives such as low-interest loans
through other lenders, subject to restrictions. Some of these
restrictions will be lifted in December 2010, and the rest in
December 2013, the filing said.
The change may help GM sell more vehicles, and rely less on
GMAC's ability to provide credit. GM sales fell 41 percent in
November after GMAC had significantly tightened credit the
prior month, leaving many prospective buyers unable to borrow.
GMAC eased its lending requirements after getting the bailout.
Also in the filing, GMAC said it will have no obligation to
finance vehicle leases. GMAC has lost money on leases because
trade-in values are falling, especially on less fuel-efficient
models such as large sport-utility vehicles.
GMAC is the main lender to GM customers, and also finances
dealer inventories. It had previously paid GM an annual
exclusivity fee and was required to meet various financing
targets for loans and leases under an agreement that had been
in effect through November 2016, the SEC filing said.
Both companies are based in Detroit.
On Dec. 29 the U.S. Treasury Department gave GMAC $5
billion from its $700 billion Troubled Asset Relief Program,
and agreed to lend GM up to $1 billion to support GMAC. Five
days earlier, the Federal Reserve granted GMAC bank holding
company status, allowing it to tap lower-cost funding.
As part of the bailout, GM and private equity firm Cerberus
Capital Management LP [CBS.UL] will reduce their respective 49
percent and 51 percent ownership stakes in GMAC.
The bailout and new business structure are designed to help
GMAC avoid a potential bankruptcy. Earlier this week, GMAC
eased its debt burden after persuading investors to swap $21.2
billion of debt for $15.7 billion of new securities plus cash.
GMAC lost $7.9 billion in the 15 months ended Sept. 30,
largely from its mortgage operations, though credit problems on
auto loans were also worsening.
GM on Wednesday received an initial $4 billion installment
from its own government emergency financing package.
In Friday afternoon trading, the automaker's shares were up
39 cents, or 12.2 percent, at $3.59 on the New York Stock
(Editing by Phil Berlowitz)