Auto finance giant GMAC and its former parent General Motors (GM) unveiled plans on Tuesday to expand lending to jump-start the sputtering auto sector a day after a US$6 billion US government rescue.
GMAC, which has long been the financial arm of GM, said it would modify its credit criteria two months after placing tight restrictions on loans to only the most creditworthy borrowers.
GM said separately it would offer zero percent financing on many new vehicles in an effort to rev up sales.
PHOTO: AP
“The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers,” GMAC president Bill Muir said.
“We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis. We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the US,” he said.
GMAC, which won approval last week from the Federal Reserve to become a bank holding company with greater access to Fed credit lines, said it would now approve loans to borrowers with a credit bureau score of 621 or above, compared to the 700 rating (based on a maximum level of 800) put in place two months ago.
GM said that loans through GMAC at zero percent would be offered for up to 60 months for many vehicles, with other loans ranging between 0.9 percent and 5.9 percent.
“We’re very excited to offer this reduced rate financing through GMAC to encourage our customers to get back into the game,” said Mark LaNeve, vice president at GM North America.
The actions come amid a collapse in sales on new US vehicles linked in part to problems obtaining credit. US new vehicle sales dropped 37 percent in November.
GMAC faced possible bankruptcy, jeopardizing financing for GM car dealers and customers, and its demise could have dragged down the Detroit automaker’s fortunes with it.
Edmunds.com analyst Jesse Toprak said the moves would boost GM sales: “Many consumers who recently intended to purchase a vehicle had difficulty obtaining credit and had to leave dealerships empty-handed and now this program will bring them back and have a significant impact on GM sales.”
Brian Bethune, economist at IHS Global Insight, said the GMAC rescue should perk up auto sales and provide some support to the recession-bound US economy.
“The landmark deal announced today is indeed path-breaking in terms of the scale of the response of the Treasury and the Federal Reserve to the economic and financial crisis that has enveloped the US economy,” he said. “However, it is only one building block of many that are in the process of being put in place to restore prosperity.”
But Douglas McIntyre of the financial Web site 24/7 Wall Street said it may be too little, too late
“It may help the operation for a few months, but what happens as the value of the GMAC loan portfolio continues to slide?” McIntyre asked.
“In all probability, the federal government will have to throw more money into the pot,” he said.
The US Treasury said late on Monday it would purchase US$5 billion in shares of GMAC to help support the company seen as critical to the auto sector.
The Treasury also announced a US$1 billion loan to GM so it could buy additional equity in GMAC, which the Treasury could take on demand.
The money for the injection comes from the US$700 billion financial industry bailout.
The action comes on top of a US$13.4 billion rescue loan package that the US government approved this month for GM and Chrysler to stave off collapse amid tight credit and dismal sales.
GM would receive an additional US$4 billion in funding from next month pending congressional approval.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
BULLY TACTICS: Beijing has continued its incursions into Taiwan’s airspace even as Xi Jinping talked about Taiwan being part of the Chinese family and nation China should stop its coercion of Taiwan and respect mainstream public opinion in Taiwan about sovereignty if its expression of goodwill is genuine, the Ministry of Foreign Affairs (MOFA) said yesterday. Ministry spokesman Jeff Liu (劉永健) made the comment in response to media queries about a meeting between former president Ma Ying-jeou (馬英九) and Chinese President Xi Jinping (習近平) the previous day. Ma voiced support for the so-called “1992 consensus,” while Xi said that although the two sides of the Taiwan Strait have “different systems,” this does not change the fact that they are “part of the same country,” and that “external
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source