Congressional Panel Says GMAC Has No Business Plan, Suggests Break Up
WASHINGTON - GMAC Financial Services still has no business plan even after receiving a $17.2 billion investment from the government, and the Treasury Department has been lax in making sure that the bank repays taxpayers, a congressional panel said.
According to the panel, Treasury should consider the possibility of breaking up GMAC and merging its auto-finance unit back into General Motors Co., Automotive News reported.
That measure would restore GM's financing operations to a model used by a number of other automakers, said the panel headed by Elizabeth Warren, a Harvard University law professor.
GMAC lost $8.3 billion on its mortgage business last year, which amounted to more than 80 percent of its total net losses, the panel's report said.
"We appreciate the panel's responsibility to analyze history; however, GMAC's management team is focused on the future," GMAC said in a statement. "That includes continuing to provide the highest level of service to auto dealers and consumers in support of our auto partners, returning GMAC to a high level of profitability, and repaying the U.S. Treasury."
Treasury, in a statement released this afternoon, said, "Treasury continues to be a reluctant shareholder and to manage its investment in GMAC in a hands-off commercial manner consistent with the administration's established principles that guide Treasury's management of financial interests in private firms."
As for its past decisions not to restructure GMAC, the federal agency said, "After considerable analysis and deliberation, Treasury viewed the course taken as the least costly and least disruptive of all the options available."
The congressional panel found that the government missed chances to increase accountability and ensure repayment of taxpayers' money with its early decisions to rescue GMAC rather than pursue other options as part of a broader auto industry bailout.
Treasury has said that it was necessary to support GMAC because of the company's dominant role in floorplan financing and that failure to do so would have undermined the government's investments in the auto industry.
In 2006, GM spun its credit arm off into a company that today is the 14th largest bank holding company in the United States.
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