With the intent to help the domestic automotive industry become financially viable, the US Treasury Department has said that they'll commit some $6 billion in taxpayer dollars to GMAC LLC.GMAC is co-owned by both
General Motors and Cerberus Capital Management, and has posted losses of nearly $8 billion over the past 15 months or so. The credit crunch has forced GMAC to reduce lending to new car shoppers, too.
The move is the latest in a series intended to ease the massive credit crisis and limit the severity of a year-long recession. Specifically, Uncle Sam will lend up to $1 billion to GM, allowing them to participate in a rights offering at GMAC as part of their reorganization. Additionally, the government will purchase a $5 billion stake in GMAC. That $1 billion for GM in the latest deal is in addition to the $13.4 billion which was promised to the carmaker by mid-February. In order to qualify for the money, GMAC must obey the same rules as other recipients- including limits on executive pay and various corporate governance requirements.All funding is to come from a $700 billion
bailout fund created by president Bush to rescue financial institutions.
photo: General Motors