www.zerohedge.com/news/2012-11-21/circle-complete-gm-reunites-gmac
Submitted by Tyler Durden on 11/21/2012 18:25 -0500
When
it comes to government bailout case studies, the past four years have
plenty. One among them is the financial company jovially called Ally - a
name which well-paid nomenclature consultants were convinced would
inspire confidence and trust. And to an extent they were right - after
all we are talking about a firm which several years ago had a far more
unpleasant name: GMAC, short for General Motors Acceptance Corporation.
It was GMAC which, as one of the various entities on the receiving end
of involuntary taxpayer generosity in 2008/2009, received a $17.2
billion bailout. The reason for GMAC's Ally's collapse is that
the firm was loaded up to the gills on various subprime and other NINJA
auto-financing loans used to purchase cars made by that other
spectacular collapse: General Motors, maker of such external
combustion vehicles as the Chevy Volt. Over the past several months the
Ally CEO, Michael Carpenter, decided to little by little start paying
taxpayers back, having sold a Canadian unit to RBC in October for $4.1
billion, and its Mexican Insurance business to Ace Ltd for $865 million.
Moments ago the firm just announced it would be selling its
international auto-finance businesses, including its operations in
Europe, LatAm and a 40% stake in its Chinese JV (a business it
previously said it would not seek to divest), for a total of $4.2
billion. The buyer? Another previously bailed out company, and one which
still counts the government as its biggest shareholder: General Motors.
And so the vendor financing circle is now complete, with GM finally
reuniting with its old captive finance units, or at least the
international part of them, which were fully owned until GM sold 51% of
it to Cerberus in 2006, after which everything went to hell.
From Bloomberg:
Another circle which is complete: that of peak credit stupidity, because while not having your own source of loans under the same roof at least provided for some operational prudence, now that GM can once again hand out loans like a drunken sailor to any Chinese or Latino American buyer that wishes to take a Chevy for a ride, and book the revenues immediately, even if the loan will be in default in several months, all bets are now off.
Sadly, as is now the norm, the US taxpayer is about to get reamed even more. Because while the $4.2 billion in receivables will be promptly repaid, what won't be, will be the tens of billions in soon to be delinquent and discharged loans that GMAC 2.0's balance sheet will be riddled with following more horrible decisions by management dead set on pushing sales regardless of the future hit to the balance sheet, and as a result, will soon lead to yet another bailout of Government Motors.
Finally, at least we now know what that $11 billion new revolver which the firm reported closing on just two weeks ago, and which provided for an extra $6 billion in dry powder, will be used for: GM will borrow at LIBOR + basis points, and use the proceeds to fund what will soon be a new international loan book in the tens of billions, which will be used with reckless abandon.
The Circle Is Complete: GM Reunites With GMAC
When
it comes to government bailout case studies, the past four years have
plenty. One among them is the financial company jovially called Ally - a
name which well-paid nomenclature consultants were convinced would
inspire confidence and trust. And to an extent they were right - after
all we are talking about a firm which several years ago had a far more
unpleasant name: GMAC, short for General Motors Acceptance Corporation.
It was GMAC which, as one of the various entities on the receiving end
of involuntary taxpayer generosity in 2008/2009, received a $17.2
billion bailout. The reason for GMAC's Ally's collapse is that
the firm was loaded up to the gills on various subprime and other NINJA
auto-financing loans used to purchase cars made by that other
spectacular collapse: General Motors, maker of such external
combustion vehicles as the Chevy Volt. Over the past several months the
Ally CEO, Michael Carpenter, decided to little by little start paying
taxpayers back, having sold a Canadian unit to RBC in October for $4.1
billion, and its Mexican Insurance business to Ace Ltd for $865 million.
Moments ago the firm just announced it would be selling its
international auto-finance businesses, including its operations in
Europe, LatAm and a 40% stake in its Chinese JV (a business it
previously said it would not seek to divest), for a total of $4.2
billion. The buyer? Another previously bailed out company, and one which
still counts the government as its biggest shareholder: General Motors.
And so the vendor financing circle is now complete, with GM finally
reuniting with its old captive finance units, or at least the
international part of them, which were fully owned until GM sold 51% of
it to Cerberus in 2006, after which everything went to hell. From Bloomberg:
There... and every other place where GM is desperate to not only sell the car, but to provide the vendor financing as the locals just can't afford to buy that little piece of America they can't wait to call their own, if only until such time as the payments on said piece stop in 2 or 3 months.Acquiring some of Ally’s assets would help GM offer competitive loans in South America, where about 50 percent of car sales are financed, Jaime Ardila, president of that region for GM, said last month in an interview in Sao Paulo.
Another circle which is complete: that of peak credit stupidity, because while not having your own source of loans under the same roof at least provided for some operational prudence, now that GM can once again hand out loans like a drunken sailor to any Chinese or Latino American buyer that wishes to take a Chevy for a ride, and book the revenues immediately, even if the loan will be in default in several months, all bets are now off.
Sadly, as is now the norm, the US taxpayer is about to get reamed even more. Because while the $4.2 billion in receivables will be promptly repaid, what won't be, will be the tens of billions in soon to be delinquent and discharged loans that GMAC 2.0's balance sheet will be riddled with following more horrible decisions by management dead set on pushing sales regardless of the future hit to the balance sheet, and as a result, will soon lead to yet another bailout of Government Motors.
Finally, at least we now know what that $11 billion new revolver which the firm reported closing on just two weeks ago, and which provided for an extra $6 billion in dry powder, will be used for: GM will borrow at LIBOR + basis points, and use the proceeds to fund what will soon be a new international loan book in the tens of billions, which will be used with reckless abandon.
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After all this, GM is now "officially" back to the same fuck up of an organization it always was , sans debt.
Ugly, lousy cars with a finance arm based upon sub-prime lending in home auto and God only knows what fields.
Oh, and they've moved a buncha the shit to China.
Thanks, Washington!
PS... Has anybody ever considered why Detroit has become a Ghost Town, a Battlefield? What was once a healthy industry became constantly violated by government rules, regulations, mandates, taxes and intervention.
Forward!
And this is what we get...this sick company in the market place, f'n things up continuously.
And I'll remind you that President Zero was so proud of this bailout, he actually had the audacity to bring it up during the debates, and M. Romney was so timid, he actually was put on the defensive for NOT supporting the bailouts...which he went on to claim that he did.
It has gotten so bad in this country, it is just ridiculous. The culture out there is ignorant...and pretty much gone.
Additionally:
I will also remind you that the one decent thing that GM did in the last three decades was the creation of the Saturn Car company...which was tossed overboard, also to support the dead wood in this company...which later went on to try to reclaim their seriousness about fuel efficiency [which Saturns were known for] by building the f'n Chevy Volt...a car which immediatly priced itself out of the market...and required govt incentives to sell the few they did.
GM should be gone. Period. GM is a monument to incompetence.
That moment will then knock everything in the stop position. Cars, food, shipping, farming, you name it, it won't be about any financial CLIFF, that is a can to be kicked to infinity "i.e. JAPAN".
Nope...... It will be $6.00 per gallon gas
The only way I see it getting there will be a large war in the Middle East "sooner or later, take your bets"
Good day- Happy Thanksgiving ZHers, and TYLERS too
Don't cha' know.
- Ned
They did drop their Oldsmobile line-up however.
Shoot Me Now.
en.wikipedia.org/wiki/Electric_car_use_by_country#Norway
1. Cheap hydro elec power
2 . A oil / capital rich society
3. extreme goverment tax breaks
4. use of bus lanes by all elec. vehicles.
http://www.youtube.com/watch?v=CvPuymTO6oo&feature=plcp
http://www.youtube.com/watch?v=mXfFyyUjOEE
It does increase the countries internal redundancy to a small degree given its extreme power surplus.
Light simple elec vehicles such as the Twizy in France or Belgium (cheap Nuke power) can work if you have the above conditions and live in compact towns where the local stores , rail station , work place etc is close at hand.
http://www.youtube.com/watch?v=l23_pVkJufI&feature=plcp
You could ... but then because truth is stranger than fiction, no one would believe you.
We really are living in an economic twilight zone where substance is almost impossible to differentiate from adumbrations.