"Due to the high cost of funding, we are not doing subprime financing at this time," GMAC spokesman Mike Stoller told Special Finance. "When the economy improves, we'll have the capacity to start again through GMAC."
Nuvell Financial Services LLC is a subsidiary of Detroit-based GMAC, the captive lender for General Motors Corp. Nuvell Credit Company LLC works to provide nonprime financing for GM dealers, while National Auto Finance was set up to do the same for non-GM dealers.
"Nuvell employed 348 people, 136 of whom will move over to GMAC," Stoller said. "We’ve set up a severance program for the remaining 212."
Stoller also reported that, as the news broke, many dealers were confused by conflicting reports regarding the status of the affected divisions.
"National Auto Finance was set up to provide prime and nonprime funding for non-GM dealers. We've read some erroneous reports that those dealers will have to look elsewhere, and that's not necessarily true. The part of that group that remains is moving over to GMAC and will continue to serve those dealers, just not as National."
Dealers were notified via fax Jan. 6 from Nuvell chief Tom Pritchard, who explained that limited capital had forced the company to reevaluate its lending strategies.
"It's a sign of the times," said Mark Berman, general manager of Saturn of Ventura (Ca.). "We used to do some business with Nuvell, but they haven't bought much lately. After watching Household, Triad and ACC [Consumer Finance] go down, we see it as one more subprime lender dropping out of the picture."