"GMAC is pleased to be part of the solution to restructure and stabilize the U.S. auto industry," said GMAC Chief Executive Officer Alvaro G. de Molina.
GMAC Financial Services has just announced that it has entered into an agreement with Chrysler LLC to provide automotive financing products and services to Chrysler dealers and customers. Chrysler Finance will continue to carry the existing book of business for dealer inventory, but would eventually be liquidated as those loans are paid off. Retail contracts going forward would be handled by GMAC.
GMAC is a bank holding company with operations in North America, South America, Europe and Asia-Pacific, and that gives it access to funding that Chrysler Finance does not have under the existing frozen credit markets. The company is owned by a Cerberus-led consortium, which holds 51%, and former owner General Motors, which now holds 49%. Cerberus, of course, is the soon to be former owner of Chrysler, which filed for bankruptcy earlier today. As of December 31, 2008, the company had $189 billion in assets and serviced 15 million customers around the world.
Under the tentative agreement, GMAC will be the preferred provider of new wholesale financing for new Chrysler dealer inventory and has a four-year agreement for “incentivized” retail financing with limited exclusivity.
President Obama had explained the rationale for the new financial arrangement earlier in the day. “It’s now clear that Chrysler Financial — the institution that finances Chrysler cars and dealers — would on its own require an unacceptably large stream of taxpayer money to remain viable — and that’s something I refuse to provide,” the President said. “And that is why, as part of this agreement, GMAC, an independent bank holding company that finances General Motors, has agreed to finance new Chrysler sales.”
The President went on to explain that the U.S. would be providing additional capital to GMAC to help unlock the frozen credit markets and free up lending so that consumers can get auto loans and dealers can finance their inventories. “Tomorrow, the Small Business Administration will be announcing it is expanding eligibility for some loans to include more suppliers and dealers, including RV dealers,” the President concluded.
“GMAC is pleased to be part of the solution to restructure and stabilize the U.S. auto industry,” said GMAC Chief Executive Officer Alvaro G. de Molina. “Providing financing options to dealers and consumers is critical as we work through one of the most challenging periods in the global auto sector. We will leverage our strengths and capabilities as the leading automotive finance company to serve our new customers, while maintaining our commitment to current customers.
“Serving as the primary source of financing for Chrysler is consistent with our strategy to diversify our automotive business,” de Molina said. “We intend to work through the operational process quickly and effectively to ensure that the appropriate level of credit is available to support the sale of Chrysler vehicles.”
GMAC will leverage its servicing platform to provide customer service for the newly originated assets. GMAC has not acquired the existing assets or liabilities of Chrysler Financial.
The majority of Chrysler dealers and consumers are located in the U.S., while there are smaller concentrations of business in Canada and Mexico and other international markets.