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GMAC critical to GM's future

Dec. 29, 2008 at 8:24 AM   |   Comments

DETROIT, Dec. 29 (UPI) -- A failure at U.S. lender GMAC could undermine the survival of auto giant General Motors Corp., an industry analyst says.

GMAC has not announced the results of a bond-swap it was conducting to reduce its debt, a move critical after the U.S. Federal Reserve granted the firm permission to become a bank Dec. 24, The New York Times reported Monday.

The White House has worked out a plan to supply GM with billions in loans to keep the company going, "but to approve loans for GM and then let its financial arm fail would defeat the whole purpose of the GM loan in the first place," industry analyst Erich Merkle at Crowe Horwath told the Times.

GMAC provides loans to car buyers and auto dealerships. GM owns 49 percent of the company. Cerberus Capital Management, owners of Chrysler LLC, owns 51 percent.

GMAC has options. Cerberus or GM could pump capital into the company or the Fed could permit GMAC to become a bank with less capital, the Times said.

It could also sell preferred shares to the Treasury to increase its capital.

On Sunday, GMAC spokeswoman Gina Proia, said final results of the swap were not available.

Topics: Erich Merkle
© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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