GMAC could give GM, Chrysler an advantage

As part of the nationalization of banks and industry, it is only right and proper that companies who fail to participate in the nationalization process be placed in positions of disadvantage.

Obviously, those companies are unwilling to place policy ahead of profit and politics ahead of product. Hence:

GMAC could give GM, Chrysler an advantage

By KIMBERLY S. JOHNSON ASSOCIATED PRESS With the federal government almost certain to take control of GMAC Financial Services, analysts suggest it could become a loan machine that gives General Motors and Chrysler a huge advantage over their competitors. The company was one of 10 financial firms ordered by the government to raise more capital after taking a stress test. In GMAC’s case, it needs $11.5 billion, and the most-likely source is the government itself. A government-controlled GMAC would have the power to offer low-cost loans to buyers of GM and Chrysler cars and trucks as a way of steering business to the troubled automakers. “GMAC could become the Freddie Mac and Fannie Mae of auto finance. It would probably help sales of GM and Chrysler cars, but it also increases the risk of taxpayer loss,” said Bert Ely, a banking consultant in Alexandria, Va. “A very serious question is being raised about how the government could use a GMAC to advance the fortunes of GM at the expense of other automakers like Ford and Toyota,” he said. The Obama administration already owns 5 million shares of GMAC, which it got in exchange for a $5-billion bailout loan. And Treasury Secretary Timothy Geithner said Friday his department is poised to offer GMAC more help. “We’re going to provide substantial support,” he said. Chrysler LLC is in bankruptcy, and General Motors Corp. is facing a June 1 deadline to finish a restructuring plan and avoid winding up in bankruptcy as well. U.S. auto sales are at a 27-year low. The government could lean on GMAC to help stimulate sales with the cash to offer zero- percent financing, or lower credit requirements. Turning GMAC into a government- funded finance arm for GM and Chrysler would give them a competitive advantage over Ford Motor Co. and perhaps other automakers, said Kirk Ludtke, senior vice president of CRT Capital Group LLC in Stamford, Conn.

PAUL SAKUMA/Associated Press GMAC, which provides financing for GM customers and dealers, lost $675 million in the first quarter because of the bad economy.