GMAC to get $7.5 bn federal funds
Automaker General Motors' former financing arm, GMAC, is likely to get funds to the tune of USD 7.5 billion from the US, says a media report. The New York Times has said that with the latest funding, the total federal assistance given to the company, which is reeling under the broader credit crisis as well as losses from subprime mortgages, would be over USD 12 billion.
The US Treasury Department has decided to provide USD 7.5 billion to GMAC, which would bring its total federal assistance to more than USD 12 billion, the daily said quoting people familiar with the discussions. "The deal is expected to close on Thursday and comes two weeks after federal regulators concluded from a stress test on GMAC that it needed an additional USD 11.5 billion in capital to weather a severe downturn in the economy," the report said.
Last year, the Federal Reserve allowed GMAC to convert itself into a bank holding company, a move that allowed the entity to apply for funds from the Troubled Asset Relief Programme (TARP). Attributing to individuals who were briefed on the discussions, the daily said that GMAC continues to provide crucial financing for car sales by GM and Treasury officials recognised that its survival was essential to the government's broader attempt to rescue and restructure the auto giant.
The New York Times pointed out that General Motors and Chrysler are both in the midst of arduous efforts to shrink in size, wring more concessions from labour unions and rethink their fundamental business strategies. In December last year, GMAC had received USD 5 billion in federal bailout money.
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