GMAC, the ailing car finance giant, today announced plans to expand lending for vehicles to a wider spectrum of customers a day after getting a $6 billion US government bailout.
GMAC, which has long been the financial arm of General Motors, said it would modify its credit criteria two months after placing tight restrictions on loans to only the most creditworthy borrowers.
GMAC, which won approval last week from the Federal Reserve to become a bank holding company with greater access to Fed credit lines, said it would now approve loans to borrowers with a credit score of 621 or above, compared to the 700 rating (based on a maximum level of 800) put in place two months ago.
'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 US,' he added.
The actions come amid a collapse in sales on new US vehicles linked in part to problems obtaining credit.
The US Treasury said late last night that it would purchase $5 billion in senior preferred equity with an 8% dividend from GMAC and make a $1 billion loan to General Motors so GM can participate in a rights offering in support of GMAC's reorganisation as a bank holding company.
The action comes on top of a $13.4 billion rescue loan package the US government approved this month for GM and Chrysler to stave off collapse amid tight credit and dismal sales. GM would receive an additional $4 billion from February pending congressional approval.
GMAC faced possible bankruptcy, jeopardising financing for GM car dealers and customers, and its demise could have dragged down the Detroit automaker's fortunes with it. GMAC has lost $5 billion over the past six months in investments in the plagued car and property sectors.
