As Cerberus Capital Management moves to acquire a 51% stake in the General Motors Acceptance Corp., GM's financing arm is pursuing business expansion strategies appealing to both GM and non-GM dealers.
For GM dealers, concerned whether the financing subsidiary will remain as committed to GM products as it has been since its founding in 1919, GMAC will remain the exclusive provider of GM's subvented auto-finance programs for a 10-year period.
At the same time, in a departure from past policies, GMAC's Motors Insurance Corp. (MIC) division has adopted a plan to broaden sales among non-GM dealers. The division offers extended service contracts, Guaranteed Asset Protection (GAP) coverage, floorplan insurance and dealership employee health insurance.
GMAC Chairman Eric A. Feldstein says GMAC's future course under the control of New York City-based Cerberus “will continue to provide GM with the same broad range of auto financing products and services as it has in the past.”
The deal, slated to bring GM up to $14 billion in cash over a period of years, is due to close in the fourth quarter of this year. GMAC expects to obtain more favorable credit ratings as it “de-links” from GM.
In a typical year, says Tom Callahan, MIC's new executive vice-president for dealer products and services, 1.2 million service and maintenance contracts are written by the GMAC unit.
Callahan says leases under 36 months still fail to stimulate GMAC service contracts, but penetration has grown for MIC to the 19% level out of the 28% of all service-contracts carrying GM vehicles. GAP coverage, a fairly recent product offered by MIC, is “really accelerating,” says Callahan.
Feldstein reports that GMAC's Nuvell Credit non-prime and private-label subsidiary chalked up record earnings in 2005.
Total GMAC revenues rose in 2005 to a record $33.2 billion from $30.1 billion in 2004.
“Following GM's agreement to sell 51% of GMAC, we now stand on the threshold of an exciting new chapter in GMAC's history,” Feldstein says.