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April 1st, 2009

GMAC Tries Last Ditch Effort to Spur Sales



GMAC, the financing arm of General Motors, announced today that they will resume auto financing to subprime borrowers. The move seems like a last ditch effort to improve years of dismal sales, and escape the federal government’s 60-day ultimatum without filing for bankruptcy.

Despite the dark clouds that lay ahead, GMAC feels confident that easing their lending restrictions will be able to free up significant financing that can light a spark under sales:

GMAC, which provides financing to many GM vehicle buyers, said it would make at least $5 billion of credit available to customers over the next 60 days…

In addition, it eased a variety of fees and payments imposed on dealers, giving them more breathing room to lower both costs and inventory of unsold vehicles.

Floorplan financing, or inventory loans, is the lifeblood of U.S. auto dealers because it allows them to pay for vehicles when they take delivery from automakers and carry them on their lots until they find buyers.

While not only risky, the move appears to be “a day late and a dollar short” as GM’s newly replaced top man sees bankruptcy as plausible. GM announced their first significant consumer incentive yesterday, yet it was done not only after the competition did so, but with less-attractive terms. Struggling to reclaim their position as the leader of the pack, yesterday and today’s announcements could serve to only set them further behind.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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