Author Topic: GMAC in talks for further taxpayer bailout: report  (Read 2090 times)

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Offline thundley4

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GMAC in talks for further taxpayer bailout: report
« on: October 28, 2009, 12:12:43 PM »
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WASHINGTON — US auto finance giant GMAC is in "advanced talks" with the US Treasury to receive a third injection of taxpayer funds, the Wall Street Journal said Wednesday.
The new injection -- worth between 2.8 billion and 5.6 billion dollars -- would come via an issue of preferred stock, the financial daily said, citing sources familiar with the discussions.
The US government, which has already put 12.5 billion dollars into the lender, owns just over one third of GMAC, the former financial arm of ailing auto giant General Motors and now jointly owned by GM and Cerberus Capital Management.
According to the Journal report, the Treasury is open to discussions of a further taxpayer bailout because officials recognize GMAC's pivotal role in the US auto industry's revival.
GMAC's daily operations are also being shored up by the authorities, with the US government bank insurer FDIC informing the lender it will guarantee an additional 2.9 billion dollars in debt, the newspaper said.
Amid the turmoil of the market's slump late last year, GMAC won approval to become a bank holding company with greater access to state credit lines.
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Bailouts: the gift that keeps on giving. I wonder if GMAC is making the auto equivalent of sub-prime loans.

Offline Eupher

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #1 on: October 28, 2009, 12:15:08 PM »
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Bailouts: the gift that keeps on giving. I wonder if GMAC is making the auto equivalent of sub-prime loans.

Well, yes, of course! EVERYBODY knows that it's our RIGHT to drive a vehicle and if we can't afford one, one will be provided at a much-reduced cost!

After all, I need a car in which to conduct my drug deals! Don't wanna put that on the street! It's dangerous!










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Offline bkg

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #2 on: October 28, 2009, 02:09:34 PM »
I wonder how much Cash for Clunkers is *REALLY* costing.

My ex-girlfriends bro-in-law works there. He's a great guy. Still, I say "Let them fail."

Offline Chris_

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #3 on: October 28, 2009, 02:30:49 PM »
I wonder how much Cash for Clunkers is *REALLY* costing.

My ex-girlfriends bro-in-law works there. He's a great guy. Still, I say "Let them fail."

I think that is part of the problem.....during CforC a large group of people of limited means traded in their perfectly sevicable, paid-off,(liability insurance only req'd) car or truck for one that they not only have to make several hundred dollars a month in payments for, but their insurance, and in some state plates increased exponentially.......a real budget-buster for the average room temperature IQ Obama voter......

Now reality is setting in, and they can't make the payments.......

Sad, as GMAC used to be GM's most profitable operating division.......

doc
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Offline bkg

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #4 on: October 28, 2009, 03:17:30 PM »
I think that is part of the problem.....during CforC a large group of people of limited means traded in their perfectly sevicable, paid-off,(liability insurance only req'd) car or truck for one that they not only have to make several hundred dollars a month in payments for, but their insurance, and in some state plates increased exponentially.......a real budget-buster for the average room temperature IQ Obama voter......

Now reality is setting in, and they can't make the payments.......

Sad, as GMAC used to be GM's most profitable operating division.......

doc

Met a girl on Monday who drives a brand new '09 Denali. 0.0% financing on a 60K truck. No idea how you monetize the financing at that point.

But it doesn't matter. We'll be handing them fist-fulls of money for years.

Offline NHSparky

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #5 on: October 28, 2009, 04:36:06 PM »
GMAC, or Ally Bank?  IIRC, they're one and the same.
“Any man who thinks he can be happy and prosperous by letting the government take care of him better take a closer look at the American Indian.”  -Henry Ford

Offline Chris_

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #6 on: October 29, 2009, 10:55:50 AM »
Met a girl on Monday who drives a brand new '09 Denali. 0.0% financing on a 60K truck. No idea how you monetize the financing at that point.

But it doesn't matter. We'll be handing them fist-fulls of money for years.

Typically the 0% is offered to a retail buyer in lieu of a substantial cash rebate (or discount),,,,,,,,in case of the Denali, I've seen them offering $4000 cash back, so at least on the corporations books so far as the sale is concerned that is how it is handled.....the customer gets a choice of either the rebate, or the equivalent in interest-free financing.

doc
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Offline Eupher

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #7 on: October 29, 2009, 11:08:16 AM »
Typically the 0% is offered to a retail buyer in lieu of a substantial cash rebate (or discount),,,,,,,,in case of the Denali, I've seen them offering $4000 cash back, so at least on the corporations books so far as the sale is concerned that is how it is handled.....the customer gets a choice of either the rebate, or the equivalent in interest-free financing.

doc

Doc, have you ever crunched the numbers on that kind of scenario to determine which "option" is best for the buyer?

I've not purchased a new car under that kind of system, so I don't know. I figure, first of all, that in order to qualify for a "cash rebate", they're going to charge you full MSRP, minimum. So the markup is already huge, as we know.

And what kind of difference would if make to shoot for the lowest interest rate - 0% being bandied about these days - and pay the full MSRP?

Coughing up a substantial down payment helps tremendously, of course, but what about the typical "Cash for Clunkers" buyer who trades in his paid-for beater in exchange for buying a car and financing the whole amount? How does that kind of thing stack up?

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Offline Doc

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #8 on: October 29, 2009, 11:43:39 AM »
Doc, have you ever crunched the numbers on that kind of scenario to determine which "option" is best for the buyer?

I've not purchased a new car under that kind of system, so I don't know. I figure, first of all, that in order to qualify for a "cash rebate", they're going to charge you full MSRP, minimum. So the markup is already huge, as we know.

And what kind of difference would if make to shoot for the lowest interest rate - 0% being bandied about these days - and pay the full MSRP?

Coughing up a substantial down payment helps tremendously, of course, but what about the typical "Cash for Clunkers" buyer who trades in his paid-for beater in exchange for buying a car and financing the whole amount? How does that kind of thing stack up?



Well....it always depends on your financial situation, but taking the rebate on the best deal that you can negotiate with the dealer is generally the cheapest way.  remember that we are dealing with TWO markups here, the manufacturer's profit margin (where the rebate and/or 0% financing comes from), and the dealer's markup, down from MSRP.....which, depending on the vehicle, varies from 12 to 15%.   If you have good credit, money for auto loans is cheap right now......our credit union is offering 3.5% loans for 48 months ....the rates increase significantly for 60 months.  Therefore taking the rebate, and obtaining outside financing (for the shortest period possible) for the balance is generally the best transaction.

Regarding "Cash for Clunkers", the problem with the bulk of these people is that they applied their $3500 - $4000 government subsidy as the down payment for the deal, and most of them bought cars in the $25,000 range, MSRP, so they have a note on the car that is at least 20 grand.......now most of them, due to the fact that they were driving a "clunker" to start with, are of limited means, so they likely financed the entire $20,000 over the longest possible period, to keep the payments low, which is typically 60 months (although I've heard of 72 month loans which make the situation much worse) ........loans of this type, on this amount mean that the buyer is "upside down" on the new car when the "tail lights go across the curb", meaning that when he/she drives his new car off the lot, the first year's depreciation lowers the value of the car to less than the customer's loan balance, and this condition will just get worse as the ownership years go on, up until about year five......so the customer is now stuck......

.....Stuck with a new car that he owes more than it is worth.

.....Stuck with a payment that, combined with insurance, taxes, and license is a budget-buster.

.....Stuck with a situation that can only be resolved by repossession, refinancing at higher cost, or bankruptcy.

For the particular consumer subset that "Cash for Clunkers" was targeted toward, it was/is a lose, lose situation, and there is fine print in the government rebate contract that won't allow them to sell the vehicle for a fixed period of time, or they have to pay the government rebate money back.....therefore they are ROYALLY SCREWED by the Democrats.....and many of them are just coming to that realization......they will likely never place the blame where it belongs however......

doc
« Last Edit: October 29, 2009, 12:09:51 PM by TVDOC »

Offline bkg

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #9 on: October 29, 2009, 11:45:01 AM »
Typically the 0% is offered to a retail buyer in lieu of a substantial cash rebate (or discount),,,,,,,,in case of the Denali, I've seen them offering $4000 cash back, so at least on the corporations books so far as the sale is concerned that is how it is handled.....the customer gets a choice of either the rebate, or the equivalent in interest-free financing.

doc

Agreed. I guess I don't know what happens on the back-end; does GM then give that $4k to GMAC in lieu of the interest?


Offline Chris_

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #10 on: October 29, 2009, 12:03:57 PM »
Agreed. I guess I don't know what happens on the back-end; does GM then give that $4k to GMAC in lieu of the interest?



It's complicated, but in essence yes, the vehicle division, in case of the Denali GMC, credits a portion of their base operating profit on that particular vehicle to GMAC......on the debit side of the books GMAC memos the amount that they would have realized from a standard finance contract on that same vehicle.......the difference whether in brackets or not, is shared between the two divisions.....(at least that was the way that it used to be done several years ago)

I can't speak for the "New GM", but in the old corporation, each division was a completely autonomous entity financially, and operated under its own set of books, and was responsible for its own individual profit/loss......

doc
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Offline IassaFTots

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Re: GMAC in talks for further taxpayer bailout: report
« Reply #11 on: October 29, 2009, 12:48:54 PM »

For the particular consumer subset that "Cash for Clunkers" was targeted toward, it was/is a lose, lose situation, and there is fine print in the government rebate contract that won't allow them to sell the vehicle for a fixed period of time, or they have to pay the government rebate money back.....therefore they are ROYALLY SCREWED by the Democrats.....and many of them are just coming to that realization......they will likely never place the blame where it belongs however......

doc

Same thing with the First Time Homebuyers Rebate.  You have to live in the home for 36 months, as your primary.  How many times have you heard that on the news?  I qualify for it, because I bought my first home this year.  I didn't buy it because of the rebate, however.  I bought it because I was ready to.  It was on my calendar to do so, and the market looked good.  Seeing as I am hoping I just bought my forever home, I don't care if there is any criteria, nor do I really care if I got the rebate.  But if I did, I would simply pay off my car.  Interest rate on that is higher than the house. 

Well, if I won the Lot-TOE, I would probably have a different house. 
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