The Auto Writer

GMAC, the financing arm of General Motors owned by both Cerberus Capital Management, LP (51%) and GM (49%) received a wonderful gift late Christmas Eve when the Federal Reserve Board of Governors awarded the company “bank holding status” a move which allowed the company to apply for and receive TARP (Troubled Assets Relief Program) funding.

As part of that move, GMAC has received a five billion dollar investment from the federal government, monies that the financing company says will be put into immediate use to free up credit. Specifically, the 700 credit score threshold that has been hampering many consumers from purchasing a car has been dropped to a much more manageable 621.

“The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers,” said GMAC President Bill Muir. “We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis. We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the U.S.”

GMAC’s inability to lend to customers who are a slightly higher credit risk was partly to be blamed for GM’s drop in sales this past November, where the automaker saw sales nosedive by just over 40% compared to the same month in 2007. Over the past several months, GM has lost hundreds of thousands of sales due to its credit woes, something that the GMAC move should help ease over the coming months.

The company says that its expanded financing policy and improved retail financing rates will apply to both new and certified used vehicles. In addition, dealer wholesale financing will remain a priority for GMAC, and is unchanged. The latter could be good news for healthy dealers who have been under a tremendous amount of pressure all year. Of course, certain dealerships (like the one I mentioned yesterday in Pennsylvania) may still find themselves on the outside looking in, as GMAC dictates who will live or who will die for GM.

Source: GMAC Financial Services