Why the sale of GMAC not going as smoothly as planned

[markusername]

http://www.marketwatch.com/news/stor...eid=mktw&dist=

For nearly a century, the big three have had that kind of relationship with Wall Street. Big Auto didn't do much in the way of sexy dealmaking, but its financing needs fed the till of big banks.

So it comes as a disappointment to some that GM's plan to revive itself has hinged on the sale of General Motors Acceptance Corp., GM's financing arm that is its most profitable business.

And by "its most," we really mean "only."

Dealmakers say the plan, unveiled in October, is turning off so-called "strategic buyers" like Bank of America Corp. because its akin to financing a bailout.

Continued at link

[b4z]

How will GM be able to offer special financing deals with GMAC if they sell it?

I guess they could pay them to finance GM cars.

IMHO they are foolish to sell it and should just muddle thru until they can become profitable again.

[mbukukanyau]

I am begging to think GM is really going under. Selling its finance Arm is really bad.. they will wipe out their cash cow, and with it cash flow, just like that... and a huge chunk of their revenue...

[asim]

I am still against the sale of this...

[give_it_all_]

They are thinking like our governments, short term. They seem to not care about long term too much to me.

[toronado10]

The government should definitely help them out if things get worse. GM (and Ford) is a symbol for this country. Besides, if they go under, I couldn't afford a European car and there is no way I would drive a Rice mobile.

[member12]

Selling GMAC is a bad idea.

If you have two sectors of business, you don't sell the healthy one to "give more capitol" for the unhealthy one to squander.

GM's automotive operations are too fat. Stop giving it more money, and let trim itself a little bit. Something is seriously screwed up if you can't make money being the market leaders in full size pickup trucks, SUVs, and on top ten selling list in may other segments.

GM needs to evaluate itself on every dollar spend, and where every dollar is earned. In my business, we spend a lot of effort to push ourselves to be the best at what we can compete with. There are sectors we are very agressive in, and sectors we find less profitable for us (maybe more for someone else), so we shy away from it.

GM needs to decide what cars and trucks are making money being sold to retail customers, and what cars and trucks are losing money. Some models will be dropped while others are improved. That is the way it works. I think the CSVs and the Deltas are losing money (I don't know, just trying to make a point), so if I were in charge, I would leave the minivan market and the compact market until I am healthy enough to compete again.

GM's money needs to go farther than it does go now. It can't waste time developing three, four, and even five lines of cars or trucks when one or two lines can be done faster, better, and cheaper. Someone needs to grow some gonads and take on the UAW. If they want to be a part of a healthy company, they need to act like they care, and start taking pay cuts and raise premiums like the rest of the country. Times for unskilled labor is bad. Ask American Airlines, Delta, Sears, and what used to be the Zenith corporation. GM management needs to figure out ways to cut cost not on products as much as the creation of these products, and redundant executive positions. What exactly does Bob Lutz do, and why is he not designing cars? What do brand managers accomplish? Why is Pontiac or Buick still around if one of them, or either of them lose money?

It seems like management is just waiting for this to blow over. Serious cuts, much larger cuts in the labor force must be made immediately. Car lines must be dropped (and I don't necessarily mean just brands, I mean unprofitable platforms if that is what is happening). Dealerships must be forced to merge. Redundant models in these dealerships must be dropped (pontiac grand prix/Lacrosse...GMC Acadia/Buick crosover thingy...Pontiac SV6/Buick Terraza...Rainier/envoy..future pontiac G8/Buick Lucerne). Someone needs to stand up to these dealerships that don't cooperate and tell them that if they want an SUV or a Sedan, they will have to pick up a partner franchise.

I wish I were in charge. I would take my sign on bonus and quit....or I would fix things. Wagoner, you and most others on the top are sitting on your ass. Do something. You have been in the business for years, you should know how to cut cost.


The government giving GM money is like giving more candy to a fat kid. What you need is a diet, not more candy. Get into shape, and start cutting back!

[kenman923]

Makes me wonder if there will be any GM left once this sale goes through.

[Randle2I]

Read the entire link. This is actually a very interesting idea that GM came up with (assuming it works). GM would only sell 51% of GMAC, netting them an estimate 10-15 billion dollars. With that money they would re-invest in their core business (automobiles) and attempt to make it profitable again. Once GM gets itself into the black, they would buy back GMAC.

This obviously has some huge pitfalls though. The biggest & most obvious is that GMAC is their only money making business right now, giving it up is a huge risk. The second is that they would have to become profitable rather quickly & buy back GMAC in short order. This is possible as the UAW contracts are up next year and with things seemingly only getting worse GM will be in a strong position to deal. The third problem I could see is if in fact GMAC becomes worth even more in the next few years (undoubtedly it will), but I'm sure GM has that covered in the terms of the sale.

[MCGARRETT]

Yeah, but even if GM "only" owns 49% of GMAC, they still make money off of it, not as much as they would make owning 100%, but with the money from the sale of the 51%, they get short term cash, GMAC gains better financing opportunities,they are NOT going to sell all of GMAC.


The rest of the article is typical GM bashing and not worth reading, the long and the short of it is....even if GM does sell 51% or GMAC(NOT ALL OF GMAC AS SOME KEEP SAYING)they want to reserve the right to buy it back whenever they want.

Dont bother reading the rest, it's the typical medial bull$hit about GM, gas guzzlers, poor quality etc..etc..etc..

[56 Starchief]

GM really has to keep this.

[the Blue One]

Originally Posted by Randle2I

The second is that they would have to become profitable rather quickly & buy back GMAC in short order. This is possible as the UAW contracts are up next year and with things seemingly only getting worse GM will be in a strong position to deal. The third problem I could see is if in fact GMAC becomes worth even more in the next few years (undoubtedly it will), but I'm sure GM has that covered in the terms of the sale.

If GM sells a controlling interest in GMAC to someone who really knows how to run it, the value will skyrocket; GM will never have the chance to buy it back. What the sale does do, however, is increase revenues to the point where the guys on top (Rick for one) will get HUGE bonuses for doing such a great job running the company. Meanwhile, quality will still be dismal, waste will still be rampant at all levels, and most of the profits from the GMAC selloff will be squandered in buying GM's way out of the Delphi mess and paying off the UAW in 3Q2007.

[darndot]

It seems like most companies want to sell of the most profitable parts in times of trouble. If you worked for GMAC this might be a good thing. I think they would want to sell off buick, and saturn.

It never has made any sense to me.

[doh]

Originally Posted by b4z

How will GM be able to offer special financing deals with GMAC if they sell it?

I guess they could pay them to finance GM cars.

IMHO they are foolish to sell it and should just muddle thru until they can become profitable again.

GMAC does not bank role incentives, GM cut GMAC a cheque for any loss of interest charges concured by any special rates.

[tom3]

GMAC makes sense for GM, maybe not for any other investor group. I was wondering what the response would be from the companies who are in this line of business, and it hasn't been all that positive. I'd think most established companies would be more interested in GMAC in full, close it down and get a non-compete clause from GM.