There is new trouble brewing in an important part of GM’s business: Ally, the former GMAC. Nearly 75 percent of the credit that GM dealers in the United States use to finance their inventories is from Ally, says a Reuters report. The report also says that Residential Capital (ResCap) – Ally’s mortgage servicing and lending unit – is again on the verge of being put into bankruptcy.
Ally still owes the U.S. Treasury Department about $12 billion. GM and Chrysler, two key sources of customers, are increasingly reluctant to steer business to it, says Reuters. This puts Ally deeper into trouble.
ResCap faces litigation over underwriting standards. The suits could bring a new set of liabilities that threaten to take Ally down with it unless it is somehow separated. According to Reuters, ResCap is seriously considering filing for bankruptcy by May 14 when it must repay a portion of its debt.
“ResCap faces litigation over underwriting standards.”
That’s about right – GMAC Mtg HAD no underwriting standards, aside from a verifiable pulse.
Now that General Motors Financial is up and running, this just provides all the more incentive for GM and its dealers to sever their remaining ties with Ally and get the hell away from that walking corpse of a company.
Chrysler would be the one really left holding the bag if Ally goes under again, as they have no captive financing business to speak of. Fiat and Chrysler have been talking about going back into that arena, but haven’t made the move yet. The clock is ticking.
Ally is not all that’s going!!!