GMAC Stays Silent on Missed Deadline of Debt Swap Deal
GMAC Financial Services remained quiet on Monday after it missed a crucial deadline last week in a process to transform the finance arm into a bank holding company, according to the Associated Press.
GMAC Financial Services remained quiet on Monday after it missed a crucial deadline last week in a process to transform the finance arm into a bank holding company, according to the Associated Press.
The deadline established by the Federal Reserve required GMAC, the finance arm of General Motors Corp., to raise enough capital through a complicated debt-to-equity exchange in order to become a bank holding company. That status would allow GMAC to gain access to the $700 billion federal bailout package and support the company’s loans to car buyers and GM dealerships.
The Fed approved GMAC’s application to become a bank holding company on Dec. 24, but the approval was contingent on the finance arm’s ability to complete the exchange. The Fed has yet to officially extended the deadline, and a GMAC spokeswoman said the company has not issued details on how and when it will complete the debt exchange.
“The exchange did expire. We plan to issue final results in the near term,” said GMAC spokeswoman Beth Coggins.
To meet the Fed’s requirement GMAC needs to raise nearly $30 billion in capital, a majority of which would come from the debt exchange. The Fed also stipulated that $2 billion of total capital come from new equity. GMAC has received a commitment of $750 million from GM and Cerberus Capital Management. However, it is unclear whether that funding would come from the bridge loans the U.S. Treasury granted GM and Chrysler LLC, which is owned by Cerberus, earlier this month.
As a bank holding company, GMAC could request up to $6.3 billion from the $700 billion bank bailout package, estimated CreditSights analyst Richard Hoffman. GMAC has not disclosed how much money it would request from the federal government’s bailout fund.
GMAC’s inability to provide financing to car buyers and dealers could hurt parent company General Motors and its new vehicle sales. More than half of new vehicle sales involve loans obtained at a dealership through financing arms like GMAC or banks, said Tom Libby, an auto industry analyst at J.D. Power and Associates.
“If this source of credit would diminish, it would greatly affect sales. That’s one reason for the dramatic decline in new vehicle sales in recent months,” he said.
Edmunds.com predicted that GM sales fell 39.3 percent in December compared to the year-ago period. The automotive information Website also said the domestic automaker’s market share is expected to be 22.8 percent of new-vehicle sales, down from 23.1 percent a year-ago.
More F&I

Modern Technology Objection Handling
In this video, Trent White shares how to confidently handle technology-based objections by helping customers understand the value of protection, even with modern vehicle technology.
Read More →
Consistency at Scale: Driving F&I Performance
With 75 rooftops across the Sunshine State, Morgan Auto Group has proven to Floridians that it knows a thing or two about driving performance in a competitive market. But it didn’t start at the top.
Read More →
Gitty Up on GAP
The foundational finance-and-insurance product hasn’t kept up with the latest conditions for auto dealers. Is the time ripe?
Read More →
How AI-Powered Coaching Is Transforming F&I Performance
See how AI-powered coaching can turn F&I customer conversations into actionable insights that support compliance, performance and profitability
Read More →
Sell Value, Build Trust
In this video, Trent White explains why selling on value, not fear, builds lasting customer trust, reduces cancellations, and drives long-term success.
Read More →
F&I Sales Give Dealers First-Half Lift
Product business shored up total profits to avoid an overall revenue tanking as product penetrations held steady, StoneEagle reported.
Read More →
Targeted Training Drives Results
Today’s technology, instead of threatening F&I managers, can actually make them better, according to an industry veteran who’s watched market setbacks roil the unprepared.
Read More →
Double the Change, Double the Chance
When an F&I manager gets a customer refusal, it’s a wise move to tweak more than one thing in the product offering.
Read More →
Just Do It
F&I managers need training, but instead of resisting application or expecting perfection, they should improve by simply acting on what they learn.
Read More →
Dealer Lender Preferences Revealed
When lenders provide consistent, fast service, their overall satisfaction scores with dealers greatly improve, according to JD Power research.
Read More →