The Treasury Department has said that it would invest $5 million dollars in GMAC LLC and would loan as much as $1 billion to General Motors Corp. as part of its effort to aid the struggling U.S. auto industry. General Motors owns 49% of GMAC, which provides financing for auto dealerships and auto buyers. It has been hurt lately due to the week economy. GMAC request to be turned into a bank holding company was granted by Federal Reserve last week. They did this so they can tap into the $700 billion Troubled Asset Relief program that was passed by Congress in October. The Treasury Department said it would loan money to General Motors so that it could participate in the $1.25 billion rights offering that is part of GMAC's transition to a bank holding company. The term sheet of the GMAC deal states that the Treasury Department will get preferred stock paying an annual dividend of 8 percent. This loan is completely different from the $17.4 billion that George W. Bush and Henry M. Paulson Jr. announced on December 19th.
Personally I am glad that they are getting this loan so they can stay in business, but will this work? If no one was buying their cars before why would they buy it now? I would hope that they will take a better approach with their cars then they did before if they want to stay in business because I dont think the government can keep bailing them out if it happens again.
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