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GMAC LLC, the auto and home lender that was bailed out in December, will receive more than $7 billion in government funds to provide financing for customers of Chrysler LLC and General Motors Corp., according to two people familiar with the matter.
A second payment may follow, said one of the people, who declined to be identified because the talks aren't public. GMAC agreed on April 30 to fund Chrysler customers and dealers after the automaker entered bankruptcy. Gina Proia, a spokeswoman at Detroit-based GMAC, and Treasury spokeswoman Jenni Engebretsen declined to comment Wednesday.
GMAC, which lost money in six of the past seven quarters and faced near collapse last year, was deemed crucial to the survival of General Motors and Chrysler, two of the country's three biggest car manufacturers. Unable to sell debt because of its junk rating, GMAC was permitted to convert into a bank holding company in December to tap the Treasury's rescue fund and attract more retail deposits.
“GMAC's core auto-finance business is being buffeted by the sharp downturn in auto sales and the worldwide credit crunch,” Gimme Credit LLC analyst Kathleen Shanley wrote in a May 14 report. Even with government support, “bondholders may not be out of the woods yet, especially if operating results continue to deteriorate,” she wrote.
Government stress tests determined GMAC needs to raise $11.5 billion to withstand a deepening recession.
GMAC has a growing “corporate center” in Charlotte that's home to top executives, including CEO Al de Molina.
