Industry News

GM Reinventing Itself

According to the Detroit News, General Motors has started formal negotiations with its dealer body, the United Auto Workers, and others to revamp itself into a smaller, viable company. A crucial part of GM's restructuring plan involves cutting about 27 percent of its 6,400 dealers in the next three years and closing, minimizing or selling Hummer, Saab, Pontiac and Saturn. GM needs financial allowances to employ a restructuring plan that includes eliminating up to 31,000 jobs, closing nine plants and renegotiating its 2007 labor contract with the UAW.

GMAC Gives Up Exclusive Rights

As stipulated in the deal that gave GMAC billions in federal aid, GMAC LLC will no longer have exclusive rights to provide no- or low-interest loans to people who take advantage of General Motors Corp. financing incentives. The action could decrease the automaker's reliance on GMAC to provide financing and possibly boost its sales by providing consumers more alternatives for affordable loans. The lender said the government will get 5 million preferred shares of GMAC paying 8 percent interest in exchange for its $5 billion capital injection to help GMAC avoid bankruptcy.

The filing followed GMAC's announcement that it would lower the minimum credit score required for auto financing from 700 to 621.

Additional Auto Industry-Linked Businesses Eligible For Bailout:

The U.S. Treasury has outlined broad guidelines on providing assistance to the auto industry. The guidelines would enable officials to provide funds to any company they consider important to making or financing cars. That makes room to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors (GM), GMAC and Chrysler. The deal between the Treasury and GMAC opened a new rescue program for the auto industry as part of the TARP. The Treasury said that the GMAC agreement was "part of a broader program to assist the domestic automotive industry in becoming financially viable."