GMAC Reshapes Business Model
General Motors Acceptance Corp. has bolstered profits at General Motors for the past several years, but it is facing strains due to higher interest rates and a succession of credit rating downgrades.
General Motors Acceptance Corp. has bolstered profits at General Motors for the past several years, but it is facing strains due to higher interest rates and a succession of credit rating downgrades.
According to Forbes, GMAC paid an average of 4.3 percent interest — up from 3.6 percent a year ago — on the billions of dollars it must borrow to finance vehicle sales.
To reduce GMAC’s balance sheet and maintain the unit’s strong profits, the finance arm is getting its business model reshaped. With the bond market becoming too expensive, GMAC has turned to sales of asset-backed securities and whole loans to raise cash. GMAC still originates the loans, but then it repackages them and sells them to banks and other institutions that have excess capital to invest.
In addition to moving auto loans off its balance sheet, GMAC is also putting more capital into its mortgage and insurance businesses, where higher margins are generated than in auto financing.
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