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.”