GMAC is officially opening up lending to buyers with credit scores of 621 or higher after a $5 billion investment from the federal government. A credit score of 621 is considered by some lenders to be the Mendoza line that separates good borrowers from the subprime. The financing arm of General Motors
, which is majority owned by Chrysler's
sugar daddy, Cerberus Capital Management, had been crippling the automaker's ability to sell cars
and trucks after declaring in October
only customers with credit scores of 700 or better would be lent to. The money that's greasing the gears here comes from the $700 billion Troubled Asset Relief Program and is separate from the $13.4 billion that GM
received from the government to avoid bankruptcy. The investment by the fed should allow GM to sell more vehicles than it has during a dismal fourth quarter that's seen sales drop
by 40% or more.
The government also gave GM an additional $1 billion to participate in a rights offering at GMAC connected to its reorganization as a bank holding company. And GMAC also announced that it raised enough capital in a debt swap to satisfy federal requirements. Executive compensation was also cut, as a pool of bonus funds was reduced 40% versus 2007 levels. Thanks for the tip, Jack!
[Source: Automotive News
, sub. req'd, Photo by Justin Sullivan/Getty]