Founded in 1919 as the General Motors Acceptance Corporation, GMAC is an important company in both the auto and home finance industries. GMAC transformed itself into a bank last December in order to access Treasury's TARP. It is now one of the largest U.S. bank holding companies.
GMAC was one of the 19 financial institutions subjected to Treasury “stress tests” to see if they retained enough capital to weather future financial storms. Treasury determined ten banks needed to raise an additional $74.6 billion, and GMAC in particular had to find another $11.5 billion. GMAC failed to raise the full amount. GMAC is now turning to taxpayers for up to $5.6 billion more.
GMAC’s survival is perceived as vital to returning US car manufacturers to profitability. GMAC acts as the main financing vehicle for both new purchases of GM cars and for wholesale inventory at GM dealers. And starting in April, it began doing the same for Chrysler dealers and purchasers. Through a subsidiary, GMAC is also the fifth largest mortgage servicer and one of the largest participants in the Home Affordable Modification Program (HAMP); Treasury's mortgage modification program under TARP.
Upadated 12/11/2009
GMAC Financial Services is a global finance company operating in and servicing North America, South America, Europe and Asia-Pacific. It was founded in 1919 as a wholly-owned subsidiary of General Motors, Corp. In November of 2006 Cerberus Capital Management, a private firm, and a handful of partners purchased a controlling 51% interest in GMAC. GM continued to hold the remaining 49% ownership stake. But in late December 2008, when GMAC began to participate in the Treasury Department’s bailout of the financial sector, Cerberus reduced its ownership in GMAC by distributing shares of the company to its co-investors. This enabled Cerberus to avoid becoming a bank holding company, which would have brought the company under greater federal oversight.
Under Treasury’s Troubled Asset Relief Program (TARP), GMAC received $5 billion in exchange for preferred stock and warrants. In addition, Treasury agreed to lend GM up to $1 billion so it could participate in a rights offering at GMAC as it reorganizes into a bank holding company. In January GM made use of that loan, using $886 million to increase its ownership stake in GMAC to just under 60%.
According to Forbes, GMAC is the country’s fourth largest private U.S. company. Among all U.S. companies, Fortune lists GMAC as the country’s 78th largest. GMAC is the sponsor of one of college football’s annual bowl games. Fortune also ranks GMAC as among the biggest financial losers (based on 2007 financials) of the Fortune 500. Early this year GMAC posted a $7.46 billion profit after five straight quarters of posting a loss. In the fall of 2008, due to low cash reserves, GMAC was forced to choose between financing GM dealerships’ operating expenses and financing car loans for vehicle purchases. GMAC chose to support the dealerships and for a time did not write any car loans. The company has since resumed financing car loans. At least one analyst believes the U.S. auto industry might be better off if a company like GM were to declare bankruptcy.
Resources
Bank Bio Chart | Financial Documents | Federal contracts
Lobbying reports | Political Contributions | Related Articles
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Federal Equity Investment |
Auto Industry Financing Program: $13.5 billion disbursed Negotiating up to $5.6 billion more HAMP: Up to $3.55 billion |
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Total Revenue |
$10,303,000,000 (2007) |
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Net Income (Loss) |
$(2,332,000,000) (2007) |
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Number of Employees |
Approximately 26,700 worlwide (12/31/2007) |
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Corporate Headquarters |
Detroit, Michigan |
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Business Sector |
Financial Services |
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Officers and Directors |
Alvaro de Molina, Chief Exec. Officer and Chief Operating Officer |
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Corporate Website |
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Executive Compensation |
GMAC (see page 151) |
1-16-2009 GM Purchases GMAC Shares 8K
USAspending.gov (last accessed 03/26/2009).
GMAC | Sidley Austin |
Center for Responsive Politics (last accessed 03/04/2009)
March 4, 2009 February Light-Vehicle Sales Slip (Barron's)
March 4, 2009 Suzuki dealer ends financing with GMAC (Huntsville Times)
March 3, 2009 Auto Sales: Worst February in 40 Years (BusinessWeek)
March 3, 2009 TALF's Terms Bring Little Relief To Struggling Auto Makers (CNNMoney)
February 12, 2009 GM talking with China's SAIC to raise cash (Reuters)
February 10, 2009 GM bankruptcy could speed restructuring – analyst (Reuters)
February 9, 2009 Fed Needs to Stop Approving (Goofy) Bank Holding Companies (Seeking Alpha)
February 9, 2009 GMAC steps back from the brink (Automotive News)
February 6, 2009 Can The TALF Save Detroit? (Forbes)
February 6, 2009 Fitch puts auto floorplan notes under review (MSNMoney/AP)
February 3, 2009 UPDATE 3-GMAC has $7.46 bln profit, main units still in red (Reuters)
February 3, 2009 GMAC posts profit, but main units lose money (Financial Post)
February 3, 2009 GMAC auto finance business loses $1.31 billion (Automotive News)
January 24, 2009 GM gets $884 million for GMAC restructuring plan (The Windsor Star)
January 23, 2009 GM Increases GMAC Stake to Near 60% (TheStreet.com)
January 2, 2009 U.S. throws GMAC $6 billion lifeline (CNNMoney.com)
December 31, 2008 Bailout Trims Cerberus's GMAC Stake (Wall Street Journal)
December 29, 2008 GMAC Receives $5.0 Billion Investment from the U.S. Treasury (press release)
December 24, 2008 GMAC – Fed opens door to bailout funds (CNNMoney)
Last Updated December 11, 2009
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