June 30, 2009
GMAC ‘Working Aggressively’ to Support Chrysler Dealers
Responding to reports that it suspended wholesale
financing for some of the roughly 2,400 surviving Chrysler dealers, GMAC
Financial Services said on Friday that it is “working aggressively” to support
the Chrysler dealer body at large.
“We began interim wholesale financing in May, and have
begun our process of underwriting for the longer term. That process will take
approximately six months,” said GMAC in a statement.
Shortly after U.S. Bankruptcy Judge Arthur Gonzalez’s
May 12 ruling to allow GMAC to provide wholesale and retail financing to 60
percent of Chrysler’s dealers, the finance company said it would begin vetting
dealers over a 180-day period to determine which dealers were eligible for
long-term credit lines. According to media reports, the process resulted in
approximately 6 percent of Chrysler’s remaining dealers having their wholesale
financing suspended.
“We fully expect the vast majority of Chrysler dealers
for which we are providing interim financing to be approved for longer - term
wholesale agreements,” read the GMAC statement. “However, we did notify some
Chrysler dealers that they did not qualify for long-term wholesale financing
based on our credit criteria.”
Mike Stoller, GMAC spokesperson, said the company is
moving toward permanent underwriting for the vast majority of Chrysler dealers.
He would not say how many dealers did not meet the company’s credit
requirements, but did say the company is ready to receive retail contracts from
all Chrysler dealers.
The same day Chrysler filed for bankruptcy protection
under Chapter 11 on April 30, the Obama administration issued a statement
detailing the agreement between Chrysler and GMAC. The White House said in the
statement that it would provide the capitalization GMAC required to support the
Chrysler business.
The first injection came on May 21, when the U.S.
Treasury provided GMAC with a $7.5 billion capital investment. While a portion
of the investment was aimed at helping the finance company withstand further
economic deterioration, $4 billion of that money was earmarked for Chrysler dealer and retail financing.
GMAC also gained approval by the Federal Deposit
Insurance Corporation (FDIC) to participate in the Temporary Liquidity Guarantee
Program, as well as an expanded exemption granted by the Federal Reserve to
originate GM-related assets at GMAC’s bank, which will operate as Ally
Bank.
To date, GMAC has received $13.5 billion in government
funding. The company also announced on June 1 that it was seeking to further
strengthen its liquidity position by offering $4.5 billion of debt guaranteed by
the FDIC’s Temporary Liquidity Guarantee Program.
“We have been straightforward in our approach and desire
to provide solutions. Going back to December, we immediately made financing
available after receiving investments from the federal government,” said GMAC’s
Stoller. “We continue to support all of our dealers and customers by
appropriately extending credit.”