GMAC Financial Services, the financing arm of General Motors Corp. (GM), said Wednesday it will temporarily ease wholesale finance charges for dealers and make at least $5 billion available for consumer auto loans in the next two months in an attempt to boost vehicle sales.
For dealers, GMAC said it will eliminate curtailment payments for aged inventory during April. Curtailment is a standard practice in the auto industry that requires a portion of the wholesale loan to be repaid after a vehicle has been in inventory for an extended period of time.
GMAC will also waive the fee for dealers to post aged vehicles on SmartAuction, GMAC's leading online remarketing site, through June to reduce their inventory and minimize future curtailment billings. In addition, the company will allow qualified dealers the option to defer wholesale interest charges for two 30-day periods during the next 120 days.
Dealers have told us that cash flow is critical right now, said GMAC President Bill Muir. We want to do everything possible to help dealers sell their inventory of cars and trucks, while preserving their working capital during the next couple of months.
For retail customers, GMAC said it will further enhance and expand its retail financing programs by reducing rates for new- and used-vehicle financing and accepting finance applications for customers with credit-bureau scores of less than 620.
GMAC's latest offers came a day after GM and Ford Motor Co (F) announced new rounds of incentives, including payment protection on vehicle loans for job losers, to boost customer confidence and jump-start vehicle sales.
Detroit, Michigan-based GM, the largest U.S. automaker, on Tuesday unveiled its GM Total Confidence plan, whereby customers can get payment protection for the first 24 months of ownership. GM will provide payment protection on vehicle loans or leases of up to nine payments of $500 a month for customers who lose jobs for economic reasons. The offer is available for vehicles purchased April 1 through April 30.
Dearborn, Michigan-based Ford launched its new Ford Advantage Plan, under which Ford will provide 12 months of payment protection of up to $700 per month on every new Ford, Lincoln or Mercury vehicle in case the customer loses his job The offer is valid for purchases from Tuesday through June 1.
Automakers on Wednesday reported sharply lower U.S. sales for March, hurt by decline in vehicle demand amid mounting job losses and near record low consumer confidence. GM reported a 44.7% drop in March U.S. sales, while Toyota Motor Corp.'s (TM) U.S. sales fell 39.0%, and Ford's U.S. sales decreased 40.9%.
GM and Chrysler LLC, which are pushed to the brink of bankruptcy amid dwindling sales, higher operating costs and huge debts, are surviving on $17.4 billion of government loans and have requested for $21.6 billion more. Ford has not sought any government funding to survive.
However, President Barack Obama said Monday the restructuring plans offered by GM and Chrysler do not go far enough to warrant additional government assistance and asked the two automakers to accelerate their survival efforts to access more funding or else face bankruptcy. GM was given 60 days to come up with a new restructuring plan in order to receive more federal aid, while Chrysler was given 30 days to complete a merger with Italy's Fiat because it was not considered viable as a stand-alone company.
GM shares closed Wednesday's regular trading session at $1.93, down a penny but gained 4 cents or 2.07% in after hours trading.
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