The Auto Writer

GM’s one time financial arm, GMAC, is back in the news again. This time, the company is getting a $3.79 billion cash infusion courtesy of the US taxpayer, an amount now added to the $12.5 billion it received one year earlier. This means that GMAC is now 56 percent owned by the federal government and owes $16.29 billion to you and me.

Officially known as GMAC Financial Services, the Obama administration had been expecting GMAC to need more money as far back as May 2009. According to Automotive News (GMAC will get $3.79 billion more in government aid), the amount initially expected was $1.81 billion more or $5.6 billion. Now let someone in Washington, DC insist that the American taxpayer was “saved” that much money with its most recent installment!

Bank Holding Status

The Federal Reserve was behind the push for a GMAC cash infusion as the business is now a bank holding company, requiring it to meet certain capital levels. The federal government granted GMAC bank holding status in December 2008 in order to the company to gain access to funds under the Troubled Asset Relief Program (TARP).

A commercial bank–Ally Bank–was started by GMAC, a financial institution known for its quirky commercials and above average interest rates. Ally boasts on its website that it is “one of the best capitalized banks in the country,” which is probably true given the taxpayer money which underpins its operation.

Four Board Seats

The US government will now double its GMAC board of director seats to four and will continue to monitor and control executive pay. According to The Wall Street Journal (Treasury to Give $3.8 Billion More to GMAC), the additional money will allow the company to absorb its mortgage losses, one other area of investment the company is known for. The company recently wrote down more than $2 billion in mortgage related assets.

GMAC dates back to 1919 when the company was founded as the financial arm of General Motors. In recent years GM sold off 51 percent ownership in the company to Cerberus Capital Management, L.P., the equity firm which owned Chrysler for a time following its separation from DaimlerChrysler. Today, GM and Cerberus have minor shares in GMAC, while Chrysler and GM are now wards of the federal government.

Paying It Back

Michael Carpenter, who was installed as chief executive officer of GMAC in November, expects that the latest bailout will help the company with its core business which includes automobile financing. Carpenter, who will discuss the bail out at a press conference on January 5, says that GMAC will repay all of the money it has received from taxpayers. Analysts expect that process to take several years to complete.