GMAC: Not Acquiring Existing Loans, Leases Of Chrysler Financial
April 30 2009 - 1:46PM
Dow Jones News
GMAC LLC said Thursday it would not inherit Chrysler Financial's
book of existing auto loans and leases, even as GMAC assumes the
mantle of lender for new financing to Chrysler LLC dealers and
consumers.
This could be a win-win for GMAC, the former lending arm of
General Motors Corp. (GM). GMAC turned itself into a bank in
December in an effort to garner federal funds required for the
strapped lender's survival. The pact with Chrysler means that GMAC
won't be saddled with problems that could arise in Chrysler
Financial's existing portfolio, stemming from Chrysler's trip to
bankruptcy court.
At the same time, being the new lending arm to Chrysler dealers
and consumers helps GMAC satisfy its requirement as a bank-holding
company to diversify its lending business away from GM.
"This certainly helps us to diversify our auto finance
business," said Gina Proia, a GMAC spokeswoman.
"What's even more encouraging is that it's a business where we
can continue to leverage our core competency," Proia said. "We have
the resources and the capability in this sector."
Earlier Thursday, President Barack Obama said Chrysler will file
for Chapter 11 bankruptcy protection the same day, kicking off what
the administration predicts will be a 30- to 60-day restructuring
of the third-largest U.S. auto maker.
In addition, the government would provide additional funding
support to GMAC to ensure continued financing to Chrysler dealers
and consumers while the auto maker restructured in bankruptcy
court. The size of the additional federal funds isn't yet known.
After its bank registration, GMAC got $5 billion under the U.S.
Treasury's Troubled Asset Relief Program.
GMAC is jointly owned by GM and an investor group led by
private-equity firm Cerberus Capital Management LP. The auto maker
and the investor group will significantly scale back their
ownership in GMAC as a condition of the lender becoming a
bank-holding company. Aside from owning a substantial stake in GMAC
and Chrysler, Cerberus owns all of Chrysler Financial. Chrysler
used to control its finance arm but the two were turned into
separate companies after Cerberus acquired Chrysler in 2007.
-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729;
aparajita.saha-bubna@dowjones.com