GM seeks $16 billion; dire future looms for Saturn, Saab

Today was the due date for GM and Chrysler to turn in their homework -- a plan defining each automaker's long-term viability. And in defining the way forward, General Motors has put the hangman's noose around Saab and Saturn.

And that's just the start.

Amidst dealer protests, GMAC seeks quiet retreat from lending business

In a move that has angered dealers and strained relations with General Motors, GMAC Financial Services has begun its retreat from the business of financing automobiles.

The first step came on Monday, when GMAC announced it would only offer financing to customers with FICO credit scores of 700 or higher.

Cerberus Capital Management, who owns a controlling 51 percent stake in GMAC, has tightened lending terms as the global credit market has ground to a halt. General Motors owns 49 percent of GMAC. Throughout history, GMAC has been the financier of most General Motors' retail sales.

California dealer group irate over new GMAC policies
The unilateral move to distance GMAC from risky auto loans has strained dealer relations so sharply that the California New Car Dealers Association put their objections in writing to GMAC Financial Services CEO Alvaro de Molina.

On its website, CNCDA says it represents over 1,350 franchised new car and truck dealers. The Sacramento Bee reports that among them, CNCDA represents 400 GM dealerships, located throughout California.

In their letter to GMAC, CNCDA President Peter Welch wrote that "Unless immediately stopped, GMAC's actions will directly lead to the insolvency of a number of our GM dealer members and will significantly erode GM's California market share." Welch said that 40 percent of California vehicle buyers will be cut off from GMAC financing under the new lending restrictions.

Compounding the problem, GMAC is now giving dealers less time to pay off their inventories.

Dealers often take out revolving lines of credit to replenish their lots with new vehicles. Depending on the terms of the credit line, dealers usually have from 90 to 120 days to pay the invoice price for the vehicles they order. But as new car sales have tanked this fall, inventories have languished with hardly any buyers in sight.

For dealers who finance their operations through GMAC, they now have fewer customers to sell to, since only those with above-average credit will qualify for an in-house loan from GMAC.

Financing that Fits... from someone else
And while dealers are being squeezed, General Motors has launched a new marketing campaign to reassure buyers that financing is available -- from someone else.

Called "Financing that Fits", the campaign will promotes the ease with which buyers will find financing at their local GM dealer, as well as large cash incentives on remaining 2008 models.

Speaking with Automotive News, Jim Campbell, GM's director of marketing and incentives said the ad campaign is aimed at potential buyers who are put off by news that financing isn't easy to come by. To aid the process of securing a loan, GM dealers will have access to Route One, a new web-based system that connects dealerships with a network of outside lenders. The new ad campaigns won't mention Route One specifically.

And as the ads hit the airwaves, GMAC is desperately seeking ways to cut its exposure to high-risk loans. So much so that minority stakeholder GM will quietly off incentives to dealers to arrange loans with outside lenders.

Automotive News reports that the program will pay up to $250 in incentives for every non-GMAC loan. Salespersons will get $100, sales managers will receive another $100 and dealers can designate an employee of choice to receive another $50. The length of the incentive program isn't clear.

According to the memo, all 2008 and 2009 Chevrolet, Pontiac, Buick, GMC, Hummer, Cadillac and Saturn vehicles will qualify.

[AN:1, 2, 3, SacBee.com, Edmunds.com]