Think about it. That’s AFTER the U.S. Treasury Department “invested” $6b of your hard-earned tax dollars into the failing auto and mortgage finance company. “Auto sales are in freefall,” Fifth Third Asset’s Mirko Mikelic told Bloomberg. The Michigan money manager (whose company holds a big chunk of GMAC debt) says the bailout “may keep them around at least until they need to restructure.” Confused. May . . . at least . . . until? Bottom line: GMAC’s Q4 new vehicle financing fell from last year’s $13.4b to ’08’s $2.7b. Despite Uncle Sam’s cash infusion and fire sale pricing and lowered FICO score loan eligibility, what’s the bet that the needle doesn’t budge on that number? Meanwhile, Rescap, GMAC’s mortgage unit, famous for its easy credit home loans, is also dying a death. On this subject, Mr. Mikelic leaves the sugar coating on the shelf. “Their mortgage business is basically closed.” With house sales going nowhere slowly, GMAC has a new strategy, related to their free pass bank status.
With the credit and securitization markets closed, GMAC boosted efforts to gain retail deposits at its bank by offering certificates of deposit with higher-than-average yields. Deposits increased to $19.3 billion in the quarter, including $7.2 billion of retail deposits, from $17.7 billion in the third quarter, GMAC said. The company also said today that it acquired all of ResCap’s non-voting interest in GMAC Bank.
So, is there another trip to the bailout buffet in GMAC’s future? Only if things get worse. Or stay the same.
[GMAC’s financial report here]
I’m so glad that the bailout is working so well. It’s good to see a government program that’s not riddled with incompetence and ineptitude. It’s obvious that the big 2.8 still don’t get it. People are DONE buying $30,000 cars. People want $15,000 cars. Maybe forever. People don’t trust the government, the car companies, the oil companies, or Wall Street. They are NOT spending money on big ticket items …period.
Almost anyone who bought a GM, Chryco, or Ford vehicle in the last 3 years will most likely be so far upside down until the end of their 7 year ‘mortgage’, that they won’t be able to buy a new car even if they wanted to. The funny thing is that THESE ridiculously upside down customers are pretty much the ONLY ones who would have considered a big 2.8 vehicle in the first place.
The big 2.8, all by themselves, have essentially disqualified their most likely customers from being able to purchase their products for at least the next 3-5 years.
That’s quite a drop from $13.4b to $2.7b. No wonder they’re hurting. And of course they don’t design or make the automobiles – their only “product” is financing of the purchase. And no one wants to give them money to finance autos.
The whole home mortgage adventure is another matter. It used to be easy money when Fannie and Freddie securitized mortgages and sold them off into the investment markets.
And the final irony is that Cerebus is at the heart of GMAC and Chrysler. We don’t know what Cerebus is really up to.
How many leases does GMAC own? I ask because there might be a huge amount of pain to come that isn’t listed on the books. Specifically, a car or truck that was leased a few years back is assumed to sell for a certain price when the vehicle is returned at the end of the lease, but the current resale values have dropped significantly below estimates from a few years ago when the leases were written. Someone is going to take a bath on that miscalculation.
People are DONE buying $30,000 cars. People want $15,000 cars.
They’re better off buying used. Of course, you still have Hyundai and Kia willing to cater to the $15k market……
Actually in GM’s new target market (government bailouts), loss is the new profit. So this is good news!
People are DONE buying $30,000 cars. People want $15,000 cars.
They’re better off buying used. Of course, you still have Hyundai and Kia willing to cater to the $15k market……
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Any car company that wants to sell cars in the next 5 years better damn well learn to cater to that market, or they’ll be gone.
Toyota, Nissan AND Honda ALL sell cars in the $15000 range, maybe a little more, but not much. Hyundai cars are now on a quality par with Honda and Toyota, KIA not so much.
My point was that $10-15000 is the new market for many people. USED or NEW, GM and CHRYCO aint selling any cars anytime soon, and I’m really glad for that. They need to go away. I hope Ford survives, they’re the only one that kind of gets it.