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

For those who expected General Motors’ once-funky Saturn brand to live on with a new owner, there has been a sad twist. Saturn, once billed as a different kind of car company, appears as dead as Pontiac and Oldsmobile.

At the brand’s 350 remaining dealers around the country, there were high hopes that a deal would be announced for GM to sell the brand to former race car driver and auto industry magnate Roger Penske.

Instead, Penske Automotive Group Inc. announced Wednesday it is walking away from the deal, unable to find a manufacturer to make Saturn cars when GM stops producing models sometime after the end of 2011. GM then announced it would stop making Saturns and soon would close down the brand, just like it did with Oldsmobile in 2004 and soon will do with Pontiac.

The day’s events mean an almost certain end to Saturn, a brand that was set up in 1990 to fight growing Japanese imports. Instead of celebrating a rebirth, the announcements sent dealers scrambling for ways to stay open and preserve about 13,000 jobs.

Source/Full Story: Yahoo! Finance
Technorati Tags: General Motors, Saturn

Economists, senior government officials and ordinary consumers are all showing greater confidence in the outlook for the economy.

But three months after signs of hope emerged, the evidence of improvement still exists only in the form of glimmers. A slew of recent economic data and other news, including yesterday’s bankruptcy filing by General Motors, make clear that the nation is still muddling through a deep recession.

“A few months ago, the U.S. was in the throes of the most severe recession since the 1930s,” said Paul Ashworth, a senior economist at Capital Economics. “We’ve had some improvement, but . . . we’re still nowhere near a meaningful recovery or even a slight recovery.”

There are unquestionable signs of economic progress — stabilization of the financial system, for example, and surveys showing that both consumers and businesses are more confident about the future. But those developments have not been enough to offset profound shifts in the U.S. economy. Consumers are trying to live more within their means, and businesses are still cutting jobs and investment spending as they try to work off the excesses of the boom years.

Financial markets have rallied sharply on promising economic news — including yesterday, when the Standard & Poor’s 500-stock index rose 2.6 percent, to its highest level this year. But the economic news has hardly been uniformly positive.

Even many of the more upbeat indicators come with caveats that make them less than impressive. Yesterday, for example, the Commerce Department reported an unexpected 0.4 percent jump in personal income in April. But the reasons were hardly confidence- inspiring: The increase was driven in part by a $25-per-week boost in unemployment insurance benefits.

Source/Full Story: washingtonpost.com

General Motors has already received around 20 billion dollars of federal loans to keep itself going. In that time the Obama administration has repeatedly given the company a failing grade in its efforts to right itself. In fact they were so displeased with their turn around plan that they fired GM CEO Rick Wagoner.

Now after all these liberal do gooders wasted, say that again wasted, billions of dollars in Federal Tax payer money Gm will end up in bankruptcy court after all. I hate to say I told you so, but bankruptcy court is where this company belonged in the first place. If only that was the end of the outrage.

Now the government is about to pay 30 billion more dollars to buy 50% of the company.

Source/Full Story: Detroit Conservative Examiner

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

Ten of America’s largest 19 banks need a combined $74.6bn (£50bn) of extra funds to boost their cash reserves.

That is the main finding of the so-called “stress tests” to see if the banks have sufficient capital to cope should the recession worsen.

Bank of America is the most at risk, needing an additional $33.9bn.

Other banks that need more money include Wells Fargo, which is said to require $13.7bn, and GMAC, the financial arm of General Motors, which needs $11.5bn.

Citigroup requires an additional $5.5bn of funds, and Morgan Stanley has been told to find $1.8bn.

Some of the banks have already indicated how they intend to raise the money they need by private means such as asset sales, rather than having to secure any additional government loans.

BBC NEWS

Source: money.cnn.com

General Motors Corp. said in a government filing Thursday that its accounting firm has found there is “substantial doubt” about the automaker’s ability to survive.

The embattled automaker made the disclosure in a 480-page filing with the Securities & Exchange Commission.

GM has sustained large and continuing losses, while saying it needs additional federal loans to remain in business. Thursday’s statement from the company’s auditors presents another hurdle the automaker will have to clear as it makes the case that it deserve additional taxpayer support going forward.

The Obama administration, under the terms of the $13.4 billion in federal loans GM has already requested, must determine that the company’s plans make it viable in the long run.

The government must determine that GM has a “positive net present value” or else demand repayment of the loans within 30 days – a development that would almost certainly plunge the company into bankruptcy and quite possibly force it out of business.

But the government has wide latitude in how it judges the company’s net present value, based on assumptions it makes about future sales, car prices and costs for the company going forward. The administration clearly does not want to force the largest U.S. automaker into bankruptcy.

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Source: FT.com

General Motors said on Tuesday it was cutting its global white-collar workforce by 14 per cent as it copes with a plunge in worldwide vehicle sales and prepares to present a restructuring plan to the US government.

The carmaker also said it was cutting its US salaried workers’ pay temporarily by up to 10 per cent as of May 1.

GM said it was notifying its employees of the job cuts, which will take place this year, and reduce its worldwide employment from 73,000 to about 63,000. In the US, about 3,400 of its 29,500 employees will be affected.

Most of the job cuts would also take place by May 1, GM said.

GM said it was cutting its executives’ base pay by 10 per cent, and that of many of its other salaried employees by 3 to 7 per cent.

The carmaker said that the laid-off employees would receive severance payments, benefit contributions and outplacement assistance.

“These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability,” the company said in a statement.

GM’s sales plunged by 49 per cent in the US in January.

The carmaker’s other global operations were currently reviewing their pay and benefits for salaried employees, GM said.

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Technorati Tags: General Motors, unemployment

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: Bloomberg.com

GMAC LLC won Federal Reserve approval to become a bank holding company, a switch that may enable the money-losing auto and home lender to tap U.S. financial bailout programs and help keep General Motors Corp. in business.

The Fed used emergency powers yesterday to grant Detroit- based GMAC’s request, citing turmoil in financial markets and the potential impact on GM, the biggest U.S. automaker, which has warned it’s running out of cash. GM and Cerberus Capital Management LP, GMAC’s majority owner, will give up control of the lender to comply with federal rules on who can own banks.

Saving GMAC is a step toward salvaging GM, which received a temporary bailout earlier this month. The $9.4 billion loan will sustain GM at least until January, when President-elect Barack Obama must find a more permanent way to save millions of auto industry jobs and avoid deepening the year-old recession. Dealers and analysts say a GM rescue is more likely to work if GMAC is still around to make car loans, which the Fed’s action ensures.

“It will certainly lessen any questions about their survivability,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York. “They should be able to change their operations enough that they’ll be able to continue to provide at least some minimal form of financing operations for the auto business.”

The Fed order said the plan “would benefit the public by strengthening GMAC’s ability to fund the purchases of vehicles manufactured by GM.” GMAC finances about three-quarters of GM dealers’ inventory, and last year handled about 35 percent of their retail customers. The lender was shut out of credit markets this year after piling up $7.9 billion in losses dating from the middle of 2007.

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Technorati Tags: GMAC, General Motors

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

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