Bloomberg reports that GMAC has sent “Dear John” letters to an unspecified number of GM dealers. One of the missives informs GM stores that the captive financier will no longer provide them with financing to buy vehicles. “Turbulence in the markets reduced our access to funds and increased the cost of funds where available,” GMAC Chief Executive Officer Al de Molina explains. “In response, we adjusted our credit policy to reflect the reduced level of funding availability.” GMAC has also sent notification to other dealers– which could include some of the previously mentioned ones– that the franchisees will have to start repaying their loans after financed vehicles have been on lots for 180 days. Hang on; is this part of a conspiracy by GMAC’s majority owners– Chrysler-owners Cerberus Capital– to force GM to buy ChyrCo? No se. Meanwhile, more details on the changes after the jump. Meanwhile, bye-bye GM dealers. “You’re increasing their payments or you’re taking away financing altogether for a lot of dealers, which basically has the effect of shutting many of them down,” said Denny Fitzpatrick, chairman of the California New Car Dealers Association and Fitzpatrick Chevrolet Hummer in Concord, California. “Dealers just don’t have that cash lying around.”
“Under the new arrangements, [GM] dealers in November will be required to begin paying down their principal balance on the loans at a rate of 5 percent monthly for 2008 models and 10 percent monthly for 2007 vehicles, according to the letters. GMAC said it will also cut the size of the loans to dealers for used vehicles to between 70 percent and 90 percent of the cost, starting Jan. 1. The lender will require 30 percent of the initial advance to be paid off by the sixth month the vehicle is on the lot. After six months, it expects full payment, GMAC said.”
If we were playing the board game “Clue”, this would be: Death by Banker in the Mailbox with a Lawyer’s Letter.
This is also pressure on the government via dealers to save GMAC. The reality is that GMAC can’t fund so a solution is needed.
GMAC is a bank. It will be rescued by 700 bn plan.
Spreading the misery for sure…
Regarding the photo… “What? Hippies need gas too?” Funny!
@Airhen: she had neither cash or grass…
The best of times… the worst of times….
Let’s see… if I’m a GM dealer. Sales are down…way down …going downer.
Sales floor is empty. Nuclear retail winter.
My slimy passel of commissioned sales-weasels hunkers in packs smokin’ and jokin’..mostly smokin’.
Headlines blather GM is augering in at WOT. So now more non-customers stay away in droves.
And now GMAC is about to yank my floorplan. …that won’t end well. In fact it’ll be all she wrote.
Options? Limited! So I instintively tighten the screws on my under-fed sales-weasels….”Sell or die!”
****
The goods news, for buyers… when they advertise, “Come on down – we’re DEALIN’!” … this time they realllly mean it. If you know what you’re doing – their are smoking deals out there.
Less good news… if you thought the high pressure-hide-the-keys-and-work-’em-over-20-ways-from-Sunday days were gone …be prepared.
… a starving sales-weasel is a dangerous sales-weasel.
I think I’d be willing to “pass” on visiting any GM or Chrysler dealer about now, if I were shopping.
First; when (not if) these two companies “auger into the ground” where do you think I’ll get “service” on my (evapoarated) warrantee?
Second; when (not if) these two companies “auger into the ground” what do you suppose will happen to my resale value? (Hint: My wife and I bought a brand-new 2002 Daewoo in 2003 for 1/2 price, after Daewoo became Deadwood in 2002).
Third; I would give ANYTHING to avoid starving dangerous sales-weasels…. even brave a used car lot instead… maybe… maybe not. At least I know the Toyota and Hyundai guys in my locale are okay… I could stick with them…..
GMAC is not a bank per se, although GMAC Bank is a small part of GMAC itself, and it’s an industrial bank under a Utah state charter, not a full-blown commercial bank. As such, there are restrictions on its scope of operations although depositors are insured by the FDIC which subjects the bank to oversight.
They ring bells on ships when they list too far to one side, signaling potential capsizing.
If you listen carefully, you hear those bells right now. In addition to the hoof beats of the Four Horsemen of the Apocalypse.
Richard Chen : she had neither cash or grass…
Then she should have a smile on her face :)
Options? Limited! So I instintively tighten the screws on my under-fed sales-weasels….”Sell or die!”
Great so I should be expecting another call from the salesguy I drove a G8-GT with a month ago beggin me to come on down because he will make me a deal. I can’t wait to tell him I am going to get a “ricer” instead because I don’t want anything to do with the Bailout trio. He told me “you don’t want to get another ricer like your Subaru”, little does he know.
Why would a guy selling Hondas when they are selling fast quit and start working at a GMC/Buick/Pontiac dealer when they can’t even give their cars away? Because his ass got fired or he is the dumbest salesmen on earth.
Good deals on GM products or not, I won’t touch them. Offer the G8 with a manual transmission, then we can talk.
Other than the G8, it’s all a bunch of crap. The G8 is crap too but it’s good hooligan fun :D
Well, this is one way to cut your dealer network without having to pay them off in court. I suspect that may still happen, but they certainly do have a legal leg to stand on this way.
I just visited my local BPG dealer to check out a G8, and . . . it wasn’t there! The had shut down the BPG side for “remodeling” and were running it out of the Saturn dealership next door. Very strange situation. Yes, the salesmen were pretty desperate and no, there were not many people there, and yes, the salesman didn’t know anything about the car (thought it was an 08, when it was an 09; telling me there was no XM when it was right on the car). More amazingly they had the cajones to put a dealer added $500 “top paint sealant” package on the car, unbelievable in this economy. If we bail-out the dealers, do we all get free paint sealant from now on?
As for the G8 itself, I was less impressed than I hoped I would be, drove nice enough, but that leather! what’s the point? Just put some cloth in there it will be cheaper, last longer and look better.
If getting rid of dealers was this easy why the heck wasn’t GM doing this years ago?
As one economist said, “we in the U.S. can’t continue to borrow money from China to buy 70% of our oil from other countries and then just burn the oil sending the carbon up into the air.”
Actually we can’t continue to do any one of those 3 things even by itself: 1 borrowing, 2 spending, or 3 polluting.
Consequently our 2.8, and our whole society, is going through extremely exciting/scary/wonderful/horrible/mind boggling changes.
Day after day I read the news and rumors here on TTAC with absolute amazement. Thank you for reporting things I never could have imagined.
GM selling 51% of GMAC to a competitor and now getting cut off – incredible.