DETROIT - Buick-Pontiac-GMC dealer Bob Fusco needs great lease deals to compete in the New York area. He hopes General Motors' deal to sell 51 percent of its stake in its financing arm, General Motors Acceptance Corp., will provide him those great leases.
"If it gives us the ability to lease cars easier, that's good," Fusco says. He is president of Roslyn Buick-Pontiac-GMC in Roslyn, N.Y., and chairman of the Greater New York Automobile Dealers Association, representing about 650 dealers.
Fusco says leasing is his, and many other East Coast dealers', livelihood. In that region, domestic automakers struggle to compete against posh foreign rivals, which typically offer good leases.
GMAC would, in fact, offer more lease options to dealers with GM brands as a separate company, says Joanne Krell, GMAC spokeswoman.
"We'd have a lower cost of capital, so it's less expensive to get funds," Krell says.
On April 3, GM announced that it would sell 51 percent of GMAC for $14 billion to a consortium led by hedge fund Cerberus Capital Management LP. The deal will result in much-needed cash for GM, which reported a $10.57 billion loss in 2005.
GM hopes the move will restore GMAC's credit rating to investment grade. That would give GMAC better profits on loans.
The GMAC sale will not disrupt dealers, GM says. "As the credit ratings improve, dealers will notice even better products that are available to them," says GM spokeswoman Toni Simonetti. "GMAC will offer better financing to dealers and customers."
GM expects to close the deal with GMAC in the fourth quarter. In the meantime, GMAC will continue with business as usual.
Simonetti says GM-sponsored marketing incentives, such as lower-interest car loans, will continue with GM subsidizing the difference in loan financing.
There is one possible roadblock. If credit rating agencies lower GM's rating to a CCC, Cerberus can choose not to close the deal, Simonetti says. Fitch rates GM a B, two notches up from a CCC rating.
If the sale does not close, GMAC would do more of an "originate and sell" strategy, Krell says. GM would write loans and sell more of them to third parties to manage.
You may e-mail Jamie LaReau at [email protected]