With a new $6 billion bailout from the Treasury approved late yesterday, General Motors has lowered its requirements for auto loans. The bailout includes a $5 billion stake in the company’s financing arm, GMAC, plus a $1 billion loan that GM can use to reorganize the lender as a bank holding company (required for access to funds from the $700 billion rescue package).
The federal aid for GMAC, which is owned by GM and Cerberus Capital, is aimed at getting GM to sell enough cars to stabilize the auto industry. The belief is that Americans want GM vehicles and simply can’t get loans to purchase them (GMAC financed 35 percent of GM’s retail customers last year, Bloomberg reports). This morning GMAC announced it will provide loans to customers with a credit rating of 621 or above, down from yesterday’s minimum score of 700.
We want to see how quickly GM resumes work on the Chevy Volt. Earlier this month, GM slammed the brakes on construction of a Flint, Mich., factory slated to produce engines for the extended-range electric vehicle. Although an existing plant in Flint offered a way for GM to produce Volt engines while saving $150 million compared with the all-new facility, the company still decided to take a step back from its plans for the manufacturing plant. “It’s temporarily on hold as we assess our cash situation,” said GM spokesperson Sharon Basel. At the time, we questioned whether the company might use progress on the Volt as leverage in negotiations for federal aid.
So, bailout? Check. Cash situation? Assessed. Volt? GM’s next move could tell us whether the much-hyped model remains (a) on track to begin production in November 2010 and (b) the company’s top priority, as the company has claimed.