GM Wants Captive Finance

[crowe]

http://www.bloomberg.com/apps/news?p...fkXk6dmE&pos=5

[ohiobuckeyes]

Before BK and after GM had a pilot program with US BANK for leasing Cadillac vehicles.

[XDCX]

Very interesting - thanks for the post.

This could explain why Ally didn't re-brand the GMAC unit for the Auto Finance Division - they knew there was a possibility that GM wanted to get back into the business.

I was also surprised to read how fast this might happen - Whitacre apparently wants GMAC back before GM issues an IPO and that could happen in the fourth quarter of this year.

The part that doesn't make sense, however, is why would they be willing to give up their bank holding company status - that gives them access to cheap money from the Federal Reserve's discount window.

The remaining question is - what happens with Chrysler? I know GMAC is contracted to act as Chrysler's captive for the next three years but what would happen after that?

[XDCX]

Marchionne spoke with reporters yesterday and indicated he's concerned about news that GM may want to acquire GMAC.

Wouldn't it be odd if Chrysler Financial rose from the ashes? Stranger things have happened.....

[Txflyer]

Originally Posted by XDCX

Wouldn't it be odd if Chrysler Financial rose from the ashes? Stranger things have happened.....

I hope not. Chrysler Financial really jerked us around. I am VERY happy with GMAC at this point.

[XDCX]

Originally Posted by Txflyer

I hope not. Chrysler Financial really jerked us around. I am VERY happy with GMAC at this point.

It's just speculation on my part - I doubt it will happen.

I also think the main reason Chrysler Financial got slaughtered was because of the dislike the Task Force had for Cerberus. To the extent that dynamic hasn't changed I doubt there's much of a chance CF will return.

[lsx only]

as a gm dealer, gmac has been good to us this year

[XDCX]

Originally Posted by lsx only

as a gm dealer, gmac has been good to us this year

I've been hearing the same thing from the Chrysler dealers.

I'll admit I had an "anti-GMAC" bias based on the way they handled the floorplan transition for the Chrysler Financial dealers but once I look beyond that I have to admit they've been doing a pretty decent job.

[XDCX]

I had a chance to read the letter GMAC sent to the Chrysler and GM dealers on Friday and thought it was interesting that GMAC's position is the ideas being floated in the media are either not possible or economically illogical.

One of the key points was GMAC would lose their Bank Holding Status if they were re-acquired by GM - a point we covered several days ago.

Also worthy of mention:

• GMAC floored 88% of GM's dealer inventories and financed 34% of their retail deliveries in the First Quarter of 2010
• GMAC floored 77% of Chrysler's dealer inventories and financed 42% of their retail deliveries in the First Quarter of 2010

[Noah]

A little birdie told me that CFC would be re-entering the wholesale financing business within the next month or so...

[XDCX]

Originally Posted by Noah

A little birdie told me that CFC would be re-entering the wholesale financing business within the next month or so...

At this point I guess anything's possible.

As I've posted countless times, I've always felt that CF was wiped out for political reasons. (The Task Force didn't like the way Cerberus was negotiating and decided to crush them. Wiping out CF was the Task Force's most effective tool to induce pain.)

By contrast, I can see politics as being the reason for CF's re-birth. The Congressional incumbents are at risk of getting slaughtered in November and they need to drum-up some good news. Having a successful IPO of GM with a big check written to the U.S. Treasury would definitely help their cause. My bet is if Whitacre says he needs GMAC to complete his IPO, he'll get it.

Additionally, Chrysler has a MUCH better chance to succeed if they have their own captive.

[Noah]

According to this...

http://www.autonews.com/article/2010...100519860/1142

...my little birdie's been right on the money, thus far.

CFC was named as co-guarantor on the TARP monies received (by what is now OldCo), thus, they were still under the gov'ts thumb and very limited in what they could do opeationally. Now, they're out.

[XDCX]

Originally Posted by Noah

...my little birdie's been right on the money, thus far.

So, are you betting that Cerberus will retain CF and it will serve as Chrysler's captive, or do you think Cerberus will sell-off CF and it will become part of Chrysler?

I recall back in November Marchionne stated he doesn't think OEMs need captives because they're too tempted to use them as a "crutch" to make money. I thought it was a BS answer then and I still do. It will be interesting to see what happens.

[Noah]

I expect that CFC will stay 'independent' and snap up the wholesale financing of the (many) new Korean franchises that are springing-up, as they backfill sales territories of dealerships that were rejected GM and Chrysler locations. HCA doesn't have the stomach, or capacity, to pick-up all of the stores that the manufacturers (both Hyundai and Kia) are looking to add. Not to mention that the Chinese and Indian manufacturers will be arriving on NA shores before too long.

...there's a real opportunity there.

[XDCX]

Originally Posted by Noah

HCA doesn't have the stomach, or capacity, to pick-up all of the stores that the manufacturers (both Hyundai and Kia) are looking to add. Not to mention that the Chinese and Indian manufacturers will be arriving on NA shores before too long.

...there's a real opportunity there.

That's an interesting thought. Hyundai and KIA are growing so fast they may favor having an additional source to provide flooring.

Concerning CF becoming Chrysler's captive, they sure burned a lot of bridges with their "walk away" letter last year. My bet is most Chrysler dealers would rather keep GMAC.