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Article published January 1, 2009
GMAC gives up some car financing in bailout
DETROIT — GMAC will no longer have exclusive rights to provide low-interest loans to people who buy General Motors Corp. vehicles, and it will stop financing leases under a deal to get federal aid for the troubled lender. GMAC LLC disclosed the terms of the deal early today in a filing with the U.S. Securities and Exchange Commission. The lender said the federal 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. GMAC is the financial arm of General Motors Corp. and is responsible for making car loans and financing dealer inventories. In the filing, GMAC disclosed that for two years, GM will be able to offer financing incentives such as zero-percent loans through other lenders. After the two years, GM can offer the loans through other lenders in addition to GMAC, the filing said. The filing also says GMAC won't have to provide lease financing. Auto finance companies have lost money on leases as trade-in values have dropped due to the collapse in U.S. vehicle sales. GMAC had paid GM an annual exclusivity fee and had been required to meet targets for leases and loans, the filing said. Also in the filing, GMAC said the government exercised a 10-year warrant to buy 250,000 more GMAC preferred shares for a penny each.
