Has GMAC turned the corner? This is a big day for GMAC and a big day for the automotive industry. Consider:
1) GMAC has successfully completed a complicated debt for equity swap. The company has increased its capital, and lowered its debt, thus greatly reducing the risk of insolvency.
2) The government has given them $5 billion under the TARP program, and an additional $1 billion to GM so they can participate in a rights offering to support GMAC's reorganization as a bank holding company.
3) GMAC will soon be operating as a federally chartered bank. They can have their debt temporarily guaranteed by the FDIC, and get access to the Fed's discount window for short-term loans.
As a result:
1) GMAC immediately announced it was resuming auto financing for a broader spectrum of customers.
2) GM immediately said they were offering new financing programs, which includes 0% financing for five years.
Nobody's expecting miracles, and we already know December's car sales will be dismal. Goldman expects GM's to be down 42 percent, Ford down 31 pecent, Chrysler down 45 percent.
But the market will be looking past this toward the new low-cost loans the company will be offering. Mark Laneve, GM's VP of sales, was just on our air saying the program would have a positive effect on sales.
This is another piece in the giant puzzle of how to jumpstart lending.
What's up with oil? Demand is trumping supply. Those of you wondering why oil keeps sinking despite new geopolitical tensions in the Mideast should bear in mind that not much oil goes through Gaza.
Most energy traders I have spoken with remain bearish on energy fundamentals: for the moment, crude oil has no reason to go up. They note that demand continues to drop, so events on the supply side (OPEC cuts, Middle East problems) have little effect on prices.
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