General Motors Corp. ends its exclusive decades-long ties with GMAC as a condition of the bailout loans extended by the U.S. Treasury Department.
The first-of-its-kind agreement includes Federal mandates that GM can access third-party lenders in addition to GMAC, while freeing the once-captive lender from its obligation to finance GMAC leases exclusively.
The addition of non-GMAC lessors extends a precedent set by GM's Saturn Div., which for years has allowed its dealers to use Chase Auto Finance as a lessor and loan issuer.
Following the December announcement, GM began offering 0% loans for up to 60 months on several slow-selling models and from 0.9% to 5.9% on dozens of other 2008 and 2009 models.
To sweeten deals, GM also added cash back rebates ranging from $500 to $4,250, which prior to the rescue funding had been offered mostly on leftover 2008 models.
In addition, GMAC lowered the minimum credit score from 700 to 621 for buyers it will finance.
One of the nation's largest-volume Chrysler LLC and Pontiac-GMC dealers, Bill Golling, of Bloomfield Township and Lake Orion, MI, says finalization of the U.S. loans for both GM and Chrysler, gave his sales an immediate uplift.
“We sold seven higher-priced vehicles right away in reaction to the loan news,” Golling tells the Oakland Press. “Six were hybrid GMC Yukons.”
In a conference call among top-volume Saturn dealers, the prospect of an extension of Chase Auto Finance and other independent lenders to other GM brands was aired by Saturn franchisees.
“We turned from GMAC to Chase in the first place to increase our lender and lessor portfolio,” Texas Saturn dealer and former Saturn division general manager Don Hudler says. “Our customers had been frustrated by our inability to access GMAC for leasing, and now we have choices available that should boost our run rates substantially.”
The Saturn conference call was arranged after GM CEO Rick Wagoner testified in Congressional hearings on the rescue loans that the division might be up for “review.”
“GM executives assured us on the call that the for-sale statement was an oversight and the division is not on the auction block,” says Bert Boeckmann, owner of two Saturn stores in California's San Fernando Valley north of Los Angeles.
The nation's No.1 Ford dealer and also owner of high-volume Honda, Mazda and Lincoln-Mercury stores under the Galpin label, Boeckmann says he had no “ideological” concerns about a vocal Federal role in changing lending policies for GM and Chrysler or naming two directors to an expanded GMAC board.
“Lee (Iacocca) and I were talking about this the other day,” Boeckman tells Ward's Dealer Business. “He recalled saving Chrysler in the early 1980s with a $1.3 billion federal loan guarantee that was repaid early with interest of nearly $400 million for the U.S. Treasury.
“They said then such a loan would never happen again. Well, what's wrong with shoring up our domestic auto industry the way it took place then and the way it's happening now?
“That's not socialism. I would hope that our U.S.-made cars and trucks continue to get government support when needed.”