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Old 04-30-2009, 02:48 PM   #1
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Default Chrysler to switch to GMAC for financial

Chrysler LLC will switch to GMAC Financial Services for its financing as part of its bankruptcy reorganization, a senior White House official said today.

"GMAC will become the financing source for new Chrysler cars," the official said on background. GMAC will handle both wholesale and retail financing.

"We made the determination that Chrysler Financial did not have the resources" to meet a reorganized Chrysler's needs, he said.

During the credit crisis, the asset-backed securities market that both finance companies heavily relied on for funding dried up. They were unable to bundle loans and leases and sell them to investors, who had become skittish about the auto industry.

As a result, both GMAC and Chrysler Financial turned to the federal government for aid. GMAC Financial Services received $6 billion; Chrysler Financial received $1.5 billion.

Chrysler Financial is burning its cash more quickly. And though both Chrysler Financial and GMAC applied with the federal government to become bank holding companies, only GMAC was approved. So while Chrysler Financial's cash is dwindling, GMAC is able to tap the GMAC Bank's growing deposits. Deposits are a relatively inexpensive source of financing.

GMAC also has provided commercial and retail financing for non-GM dealers in the past and expressed interest in expanding this business. Through the GMAC Bank, for example, it recently launched a dealership mortgage program that is open to dealers of all makes.
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