Auto finance giant GMAC and its former parent General Motors announced plans Tuesday to expand financing to a wider spectrum of customers a day after a six-billion-dollar US government rescue.
GMAC, which has long been the financial arm of General Motors, said it would modify its credit criteria two months after placing tight restrictions on loans to only the most creditworthy borrowers.
General Motors separately said it would offer zero percent financing on many new vehicles in an effort to jump-start weak sales.
GMAC, which won approval last week from the Federal Reserve to become a bank holding company with greater access to Fed credit lines, said it would now approve loans to borrowers with a credit bureau score of 621 or above, compared to the 700 rating (based on a maximum level of 800) put in place two months ago.
"The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers," said GMAC president Bill Muir.
"We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis. We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the US."
GM said loans at zero percent would be offered for up to 60 months for many vehicles, with other loans ranging from 0.9 percent to 5.9 percent.
"We're very excited to offer this reduced rate financing through GMAC to encourage our customers to get back into the game," said Mark LaNeve, vice president at GM North America.
The actions come amid a collapse in sales on new US vehicles linked in part to problems obtaining credit.
The US Treasury said late Monday it would purchase five billion dollars in shares of GMAC to help support the company seen as critical to the auto sector.
The Treasury also announced a one-billion-dollar loan to General Motors so GM can can buy additional equity in GMAC, which the Treasury could take on demand.
The Treasury said the money for the injection would come from the 700-billion-dollar billion financial industry bailout, and that GMAC would have to meet restrictions on executive pay as part of the deal.
The action comes on top of a 13.4-billion-dollar rescue loan package the US government approved this month for GM and Chrysler to stave off collapse amid tight credit and dismal sales. GM would receive an additional four billion dollars from February pending congressional approval.
GMAC faced possible bankruptcy, jeopardizing financing for GM car dealers and customers, and its demise could have dragged down the Detroit automaker's fortunes with it.
GMAC has lost five billion dollars over the past six months in investments in the plagued automobile and real estate sectors.
The lender won key support last week when the Federal Reserve said GMAC could become a bank holding company, giving the company access to central bank loans and the financial industry bailout.
GMAC had sought to get bondholders to convert 75 percent of their debt into equity, under a plan to raise 30 billion dollars in capital, although the results of the exchange were not yet released.
The Fed decision required GM to sell most of its 49 percent stake in GMAC, and forced private equity firm Cerberus Capital, which has 51 percent of GMAC, to turn much of its voting stake over to its own investors.
