GMAC Inc., the auto and home lender that became majority-owned by the U.S. government last week after a third bailout, may post a loss of more than $10 billion for 2009 as more borrowers defaulted on mortgages.

GMAC, based in Detroit, said yesterday that it expects to report a fourth-quarter loss of about $5 billion. Both the quarterly and annual losses would be records for the primary lender for General Motors Co. and Chrysler Group LLC dealers.

The company received a $3.79 billion infusion from the Treasury Department on Dec. 30. The U.S. earmarked about $13.5 billion for GMAC in two previous capital infusions and now controls a 56 percent stake. If the government converts preferred shares to common equity, it would own more than 70 percent of GMAC, the lender said during a conference call.

“I think for the taxpayer it’s going to be a loss,” said Christopher Whalen, managing director of Torrance, California- based Institutional Risk Analytics. “Who is going to buy this? What is the compelling business model that wants us to have this company continue to exist?”

Source/Full Story:  Bloomberg.com

The federal government said Wednesday it will take a majority ownership stake in the troubled auto lender GMAC, providing another $3.8 billion in aid to the company, which has been unable to raise from private investors the money it needs to staunch its losses.

The new aid package for GMAC, coming as most large banks are repaying the government, underscores both the problems afflicting the company and its importance to the Obama administration’s efforts to revive the auto industry.

GMAC, which already has taken $12.5 billion in direct federal aid along with other forms of government support, is the largest lender to General Motors and Chrysler dealerships and to their auto-buying customers.

The Treasury Department said it will increase its stake in GMAC to 56 percent from 35 percent. It also will hold about $14 billion in what amount to loans that GMAC may eventually be required to repay. The government plans to appoint four of the company’s nine directors.

Source/Full Story: washingtonpost.com

GMAC Inc., the home and auto lender, is discussing with the Obama administration an additional aid package of about $3 billion to $4 billion, according to a person familiar with the matter.

The size of the assistance remains under negotiation, the person said on condition of anonymity because the talks are private. A deal may be reached within days as Detroit-based GMAC incorporates losses from its home-loan businesses, the person said. The objective is to restore the company to profit in the first three months of next year, the person said.

GMAC has already received two rounds of government aid totaling $13.5 billion as it struggled with losses at its home mortgage operations, which include Residential Capital LLC, known as ResCap. The Obama administration regards the lender as crucial to the survival of the U.S. auto industry. General Motors Co., its former parent, and Chrysler Group LLC rely on the firm to finance their vehicle buyers.

Source/Full Story: Bloomberg.com

The chief executive of G.M., Fritz Henderson, and the vice chairman of Chrysler, James E. Press, said dealerships that sold a smaller number of vehicles weighed down their companies. A more streamlined corps of dealers, they said, was vital for survival.

“I can surely empathize with the dealers who were not brought forward into the new company. And I understand their disappointment more than you could know,” said Mr. Press. “This has been the most difficult business decision I have ever personally had to take. But the decisions had to be made. They were gut-wrenching, but absolutely necessary for Chrysler’s survival.”

…

Chrysler plans to close about 800 dealerships next week, less than a month after informing franchise owners of those plans. G.M. hopes to reduce its dealerships to about 3,500 by the end of next year from 6,000 now. The company told more than 1,000 dealerships recently that they had until June 12 to accept a plan that would allow them to stay open until October 2010, when their current agreements with G.M. expire.

Source/Full Story: NYTimes.com

f General Motors Corp (GM.N) files for bankruptcy, as widely expected, its healthy assets will be quickly sold to a new company owned by the U.S. government, a source familiar with the situation said on Tuesday.

The source, who was not cleared to speak with the media and would not be identified, said the U.S. government would pay for the assets by assuming the automaker’s $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.

The government is negotiating the terms on which it will assume GM’s secured debt and might make an the offer to holders of the debt that is far superior to the one made to Chrysler LLC’s secured lenders, the source said.

Chrysler filed for bankruptcy in April and has proposed paying its secured lenders about 28 cents on the dollar.

The new GM is likely to distribute stock in the company to GM’s unions in return for concessions on wages and benefits, the source said.

The percentage of stock given to the unions, bondholders and other creditors whose debt is not repaid by new GM has not been determined, the source said.

In addition, the government would extend a credit line to the new company, the source said.

The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.

The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs as sales have plummeted in recent years.

Source/Full Story:: Reuters

Chrysler began its stint in bankruptcy court on Friday with a plea for haste and a doomsday warning that, if it could not execute its proposed restructuring within two months, hundreds of thousands of jobs could be lost.

Outside the Manhattan courtroom, the row over the Chapter 11 filing rumbled on with creditors crying foul and an Obama administration official accusing them of “red herring” arguments.

“We have to hit it in high gear,” Corinne Ball of Jones Day, representing Chrysler, told the packed court in the first hearing on the carmaker’s petition.

Chrysler is hoping that because it was able to convince many stakeholders to accept concessions in exchange for supporting its restructuring plan, bankruptcy judge Arthur Gonzalez will let it cancel dealer contracts and impose the plan to swap $6.9bn of debt for $2bn in cash on those debtholders that have not accepted it.

Source/Full Story:: FT.com

Talks between the Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy broke down Wednesday, making it all but certain the car maker will file for Chapter 11 protection Thursday, The Wall Street Journal reported late Wednesday, citing people familiar with the discussions. Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, say all the pieces are in place to get the country’s third-largest employer through the court quickly, perhaps in a matter of weeks, the report said.

Source/Full Story::  MarketWatch

Source: Bloomberg.com

General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

If federal officials fail to get a consensual agreement to change their position regarding repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.

“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.

GM rose 4 cents to $2.88 at 9:52 a.m. in New York Stock Exchange composite trading. Chrysler isn’t publicly traded.

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Technorati Tags: General Motors, Chrysler, bankruptcy

Source: International Herald Tribune

Even a U.S. government bailout could not save three of the last remaining plants in the United States still making sport utility vehicles.

Reeling from its financial problems and a collapsing SUV market, General Motors on Tuesday closed its factories in this city and in Moraine, Ohio, marking the passing of an era when big SUVs ruled the road. The moves followed the shutdown last Friday of Chrysler’s factory in Newark, Delaware, which produced full-size SUVs.

The last Chevrolet Tahoe rolled off the line here in Janesville shortly after 7 a.m. in the 90-year-old plant, which had built more than 3.7 million big SUVs since the early 1990s.

Most of the plant’s 1,100 remaining workers were not scheduled to work the final day, but many showed up for an emotional closing ceremony. Dan Doubleday, who had 22 years on the job, broke down in the plant’s snowy parking lot afterward.

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Technorati Tags: General Motors, SUV

Source: CNN.com

The collapse of negotiations could possibly doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler potentially following close behind.

While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.

The struggling automakers may get some money anyway.

As part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn’t act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program, according to the sources familiar with the conversations.

One of the sources said that a White House official made it clear to a GOP senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.
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The sources asked not to be named because of the sensitivity of private conversations.

Democrats pressed the White House from the start to help Detroit by using some of the $700 billion for the financial sector, but the White House and Treasury Secretary Henry Paulson refused.

“I would only hope that the president, who has worked so well with us for the past several weeks, would now consider using the TARP money,” Reid said after Thursday night’s vote.

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Technorati Tags: General Motors, Chrysler , bailout

Source: Bloomberg.com

The Bush administration’s $14 billion automaker bailout plan and other alternatives lack the votes to pass the Senate, as lawmakers seek to beat a deadline to keep General Motors Corp. and Chrysler LLC from collapsing.

GM and Chrysler are in a race against the clock as they need federal aid to keep from running out of cash early next year. Pressure is mounting on GM as a small number of partsmakers ask for payments in advance, people familiar with the matter said.

“It’s going to be really hard for anything to get to 60” votes needed to overcome delaying tactics, said South Dakota Republican John Thune.

Senate Majority Leader Harry Reid said he’s working on an agreement that would let the Senate consider Democratic legislation approved yesterday by the House, as well as a slightly different version by Senate Democrats and a Republican alternative. The Bush administration has endorsed the Democratic plans it helped negotiate.

“We have danced this tune long enough,” said Reid, a Nevada Democrat. “If the Republicans want to have a better bill then they should offer an alternative and I invite them to do that.”

The House went home after passing its plan last night. Speaker Nancy Pelosi tossed a challenge to senators, saying on Bloomberg Television she wouldn’t bring her chamber back for further action if the Senate passed a different version.

Some Republicans threatened to block the Democratic plans from coming up, saying a so-called auto czar created by the legislation wouldn’t have enough authority to enforce cost cuts at the automakers.

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Technorati Tags: bailout , automaker

General Motors Corp and Chrysler LLC

Source: Reuters

General Motors Corp and Chrysler LLC are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi-billion dollar government bailout, Bloomberg reported, citing a person familiar with internal discussions.

In response to automakers’ bailout plea, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy — negotiated with workers, creditors and lenders — could be used to reorganize the sector without liquidation, Bloomberg said.

General Motors and Chrysler could not be immediately reached for comment by Reuters.

Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors Corp, Ford Motor Co or Chrysler would spread throughout an industry that is bleeding cash in a global slowdown.

All three automakers have urged Congress to authorize $34 billion in loans and credit lines, saying they will restructure, and cut models, jobs and executive pay to remain viable.

The White House did not dismiss the industry’s $34 billion figure on Wednesday but said it was too early to say what it might support on an emergency basis.

Senate Majority leader Harry Reid wants to try to find a way to avert threatened bankruptcies in the U.S. auto industry with Detroit Three chief executives readying for a make-or-break hearing on Thursday on the bailout request.

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Technorati Tags: General Motors, Chrysler

Source: The News Journal

Moody’s Economy.com chief economist Mark Zandi estimates that 2.6 million jobs — about 1.9 percent of the U.S. work force — would be lost if GM, Chrysler and Ford were to go under.

That includes more than 255,000 people directly tied to the three companies and another 2.3 million whose jobs are indirectly dependent — everything from people who work in the steel, glass, fabric, tire and electronic industries to the barista who makes $4 cappuccinos for the ad executive who’ll be out of work when his auto industry business ceases to exist.

Zandi argues the economy is too weak to absorb that fallout.

“This could be the thing to push us over,” he says. “The ripple effect is like throwing a big boulder into the economic pond.”

The auto industry is woven into the grass roots of the U.S. economy, through its dealer networks, the advertising it buys in newspapers and local TV and radio stations, the health care it buys for its workers and their families and the retirees it supports.

The domestic auto industry supports nearly 800,000 retirees and spouses with pensions and, until recently, health care for everyone. Now that’s being cut back for white-collar retirees, but if the automakers file for bankruptcy, they could shed their pension costs and force the government to pick up the tab.

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Technorati Tags: General Motors, Chrysler, Ford

Source: CNN.com

Some lawmakers lashed out at the CEOs of the Big Three auto companies Wednesday for flying private jets to Washington to request taxpayer bailout money.

“There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they’re going to be trimming down and streamlining their businesses,” Rep. Gary Ackerman, D-New York, told the chief executive officers of Ford, Chrysler and General Motors at a hearing of the House Financial Services Committee.

“It’s almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious.”

He added, “couldn’t you all have downgraded to first class or jet-pooled or something to get here? It would have at least sent a message that you do get it.”

The executives — Alan Mulally of Ford, Robert Nardelli of Chrysler and Richard Wagoner of GM — were seeking support for a $25 billion loan package. Later Wednesday, Senate Majority Leader Harry Reid reversed plans to hold a test vote on the measure.

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Technorati Tags: Ford, Chrysler, GM