GMAC (& therefore GM) Officially Saved

[enzl]

Ring up another few billion in the bailout bonanza...Feds give GMAC $6B+ including a cool $1B to GM $ to invest in GMAC.

Hugely good news for GM. And their dealers.

http://money.cnn.com/2008/12/29/news/compa...sion=2008122919

[Chevy Nick]

I wonder what the market will do tomorrow on this news?

I'm also interested to see how truck sales did in December. If this bailout opens up GMAC's purse strings GM could move some trucks in January.

[enzl]

A little bit of back of the napkin-type analysis...

...but, if you factor in the lack of GMAC retail financing (IIRC, 2% of GM sales in Nov. 08 v. up to 50%+ previously) for the last few months, GM might actually be gaining significant marketshare. GMAC's implosion has hurt GM in many ways more than managerial blunders on the product side---especially since you've got to figure the economy has all but eliminated the casual shopper.

[Z-06]

GMAC (& therefore GM + Cerebrus -> Chrysler) Officially Saved

Fixed

[GXT]

Well that is another excuse gone.

So neither GMAC nor GM could satisfy the government's requirements. So what does the government do? It gives them the cash.

This is getting silly.

[GXT]

GMAC (& therefore GM + Cerebrus -> Chrysler) Officially Saved

Fixed

"Officially saved?"

I'm not sure it matters much. If this is anything like the banks (and appartently it is!) it isn't like GMAC is going to open the purse strings very wide.

But at least it takes another excuse off the table for Feb/Mar when GM+Chrysler come asking for more money.

[enzl]

"Officially saved?"

I'm not sure it matters much. If this is anything like the banks (and appartently it is!) it isn't like GMAC is going to open the purse strings very wide.

But at least it takes another excuse off the table for Feb/Mar when GM+Chrysler come asking for more money.

To clarify---without a GMAC bailout, there was no GM going forward. A GMAC failure meant instant death for up to 40% of GM's dealers. The money used should allow some lending by GMAC, as opposed to the extremely limited participation today. Any incremental help is desperately needed.

[Z-06]

"Officially saved?"

I'm not sure it matters much. If this is anything like the banks (and appartently it is!) it isn't like GMAC is going to open the purse strings very wide.

But at least it takes another excuse off the table for Feb/Mar when GM+Chrysler come asking for more money.

Check the thread title and then check my statement. I am not making any comment about whether it matters or not. What I meant was both GM as well as Chrysler got indirect funding becuase of Cerebrus' stake in GMAC.

[Drew Dowdell]

GMAC is now lowering minimum credit score from 700 to 621.

[evok]

Ring up another few billion in the bailout bonanza...Feds give GMAC $6B+ including a cool $1B to GM $ to invest in GMAC.

Hugely good news for GM. And their dealers.

http://money.cnn.com/2008/12/29/news/compa...sion=2008122919

Oh Buickman - go sell some cars.

[BuddyP]

Saved? No, UAW "saved" to continue to dwindle GM to nothing.

It's a shame it went through.

[enzl]

Saved? No, UAW "saved" to continue to dwindle GM to nothing.

It's a shame it went through.

Not going to lecture with a primer on exactly how GM can't survive without GMAC---but suffice it to say that while the UAW is a direct beneficiary of the whole ship not going down, they are simply one of many actors who had their asses pulled from the fire with the rescue of GMAC.

And I have to give GMAC credit in one regard---the day after they got their money, it was put into circulation, unlike the other banks that have been bailed out--many just stuck their cash in their vaults to wait out the storm...

[Drew Dowdell]

And I have to give GMAC credit in one regard---the day after they got their money, it was put into circulation, unlike the other banks that have been bailed out--many just stuck their cash in their vaults bought $37 million dollar Park Ave apartments paid executives $1.6 billion in bonuses to wait out the storm...

[GXT]

GMAC is now lowering minimum credit score from 700 to 621.

I guess I was wrong about the purse strings not opening.

It will be interesting to see if that just gets them into the same trouble again. Not that it was a lot of trouble really, what with Uncle Sam ready to clean up the mess.

[GXT]

Check the thread title and then check my statement. I am not making any comment about whether it matters or not. What I meant was both GM as well as Chrysler got indirect funding becuase of Cerebrus' stake in GMAC.

Gotcha, and good point.

[Drew Dowdell]

I guess I was wrong about the purse strings not opening.

It will be interesting to see if that just gets them into the same trouble again. Not that it was a lot of trouble really, what with Uncle Sam ready to clean up the mess.

lowering the credit score requirement is just one piece. I'm sure the people here who work at dealerships can verify, but there are going to be stricter requirements for proof of income and minimum down payment.

[Camino LS6]

Movement is a good thing, however incremental, inertia was killing GM faster than any other factor. Leaving them twisting in the wind for so long has done great damage and made recovery that much more difficult.

[VenSeattle]

I guess I was wrong about the purse strings not opening.

It will be interesting to see if that just gets them into the same trouble again. Not that it was a lot of trouble really, what with Uncle Sam ready to clean up the mess.

I thought GMAC's problems were with mortgages, not auto loans? Lowering credit score requirements for approving auto loans shouldn't lead GMAC down the same path of darkness.

[thenewdamage]

GMAC is now lowering minimum credit score from 700 to 621.

So how is that likely to affect those of us with good credit? Will we still pay the same interest rates or will we have to pick up the tab again if these loans go south?

[GXT]

I thought GMAC's problems were with mortgages, not auto loans? Lowering credit score requirements for approving auto loans shouldn't lead GMAC down the same path of darkness.

I'm not sure where most of the problems were.

I believe the first auto-related steps taken involved a reaction to the huge negative equity they were taking on lease returns for trucks. I never really understood why auto loans would be affected. I just assumed it was a knee-jerk reaction to the economic situation in general and the fear that many auto loans would go bad.

[GXT]

So how is that likely to affect those of us with good credit? Will we still pay the same interest rates or will we have to pick up the tab again if these loans go south?

Sounds like if you pay taxes at all you may pick up the tab.

[CARBIZ]

Sounds like if you pay taxes at all you may pick up the tab.

Good grief: do you actually think before you type?

[GXT]

Good grief: do you actually think before you type?

Well that was a very thoughtful response on your part.

Care to actually comment on what is wrong with my post?

[thenewdamage]

Well that was a very thoughtful response on your part.

Care to actually comment on what is wrong with my post?

I was kinda wondering the same thing. Your response is kinda what I was thinking. And I generally do think before I post.

[carman21]

Sounds like if you pay taxes at all you may pick up the tab.

No, if you buy anything over the next few years you will pay for all of this.

Inflation is going to be out of control by 2011.

Edited January 3, 2009 by carman21

[CARBIZ]

Inflation is not necessarily an evil thing. I read an article in the Times a very long time ago that basically said world wide inflation was necessary to keep 3rd world countries from defaulting on their debt. Out of control inflation (like Argentina experienced for a while, or like in banana countries like Zimbabwe currently have) is a bad thing, for sure.

Think about this: you buy a house for $55k (like my parents did in '74.) Your household income is $30k a year. Your mortgage is $400 a month. Ten years later, your income is $60k a year, your mortgage is still $400 a month, thanks to 8 or 9% inflation.

Of course, 21% mortgages, like back in the early '80s were nasty.

As to the taxes BS: if GM or Chrysler go down, there will be a lot of nearly bankrupt retirees out there and a lot of unemployed people. At least with 'loaning' GM and Chrysler money, there is a very good chance that all of this will be averted. Remember: the real reason GM is in trouble right now is because the money markets are frozen - and that is affecting all the car companies.

However, certain people's myopic, malicious attacks against GM are clearly coming from a position of personal gain - and they are so one-sided. Good grief: at least get a different chord to play on the violin.

It would be like me trolling on ToyotaNation and constantly harping about Toyota's failings. Why bother? A couple years ago, I trolled on TN, but decided they were a bunch of Stepford Freaks and quit after a couple months.

[GXT]

As to the taxes BS: if GM or Chrysler go down, there will be a lot of nearly bankrupt retirees out there and a lot of unemployed people. At least with 'loaning' GM and Chrysler money, there is a very good chance that all of this will be averted. Remember: the real reason GM is in trouble right now is because the money markets are frozen - and that is affecting all the car companies.

The real reason GM is in trouble is because they lose thousands of dollars per vehicle sold. That was true even when the money was flowing (they've been bleeding money for 4 years now). This is just speeding things up.

GM is taking on more debt as they move towards being a smaller and smaller company. GM was worth -60 billion end of 3Q 2008. They must be at -70 Billion by now. Do you know how long it takes to earn 70 Billion when you are losing between 1 and 3 billion per Q?

There isn't a good chance this will be averted. My tax dollars are about to be shuffled off to China. Most of those people will be unemployed anyways.

"Remember: the real reason GM is in trouble right now is because the money markets are frozen" - And you have the nerve to call my posts "BS".

Edited January 5, 2009 by GXT

[Chicagoland]

"My tax dollars are about to be shuffled off to China"

but then many people have no problem buying Chinese made products to 'live better'.?

Conservative decry helping Detroit as 'socialism', yet have no problem at all sending jobs, $$ to China, which is still a communist country.

[GXT]

"My tax dollars are about to be shuffled off to China"

but then many people have no problem buying Chinese made products to 'live better'.?

Conservative decry helping Detroit as 'socialism', yet have no problem at all sending jobs, $$ to China, which is still a communist country.

I'm Canadian, so by most American definitions I'm just a step or two shy of full-on communism.

What I want is the usual Canadian way: my tax dollars shuffled to Canadians. I'd rather they gave the 4 billion directly to the Canadian auto workers as a bridge to their next job.

I will pay more for a quality product. But I am not prepared to continue to pay too much for that good just because it is sold two steps north of the Canada/US border. On a related note, the last couple of items I bought for my house renovations I was able to buy in Canada because it was price-competitive with the US.

The reality is that GM is likely to fail. If they don't, then we can still expect that many (the majority?) of those jobs will be cut anyways. Those that remain will have cut wages and few benefits as per the 2010 changes.

Come out west. We can't get enough workers. Based on GM's 2010 wage cuts, by 2010 in many places you should be able to make about as much pumping gas as working at GM. Plus you'd probably get a signing bonus.

Edited January 6, 2009 by GXT

[PurdueGuy]

Regarding the comments about this costing the taxpayers: the "bailouts" are LOANS, not free money. The only instances where the "bailouts" are going to cost the taxpayer anything long-term, is where a company receives a loan and goes bankrupt anyway, and thus does not pay back their loan.

[GXT]

Regarding the comments about this costing the taxpayers: the "bailouts" are LOANS, not free money. The only instances where the "bailouts" are going to cost the taxpayer anything long-term, is where a company receives a loan and goes bankrupt anyway, and thus does not pay back their loan.

These are loans with an unreasonably low interest rate given the risk. That interest rate differential is the first aspect of the bailout. They are also loans with an unreasonably low expectation of repayment. That is the second aspect of the bailout. If GM is unable to pay the money back then that is the third and most significant aspect of the bailout.

But if we want to be really accurate, I think the appropriate term is "economic extortion".

If you have any doubt this is a bailout, I would encourage you to go down to your bank, tell them you are worth negative several hundred thousand dollars, that you have commitments that cost you thousands of dollars a year, you have no job, and things are going to get worse over the next year or so, but you would like a loan of tens of thousands of dollars at only a couple of percent interest.