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U.S. gov’t provides 3.8 bln dollars of new capital to GMAC

Published: 30/12/2009 05:00

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The U.S. government announced on Wednesday that it will provide 3.8 billion dollars of new capital to help ailing auto and mortgage giant GMAC.

The U.S. flag flies at the Burt GM auto dealer in Denver June 1, 2009. (Xinhua/Reuters, File Photo)

“Treasury will commit 3.8 billion dollars of new capital to GMAC rather than the 5.6 billion dollars originally announced,” said the Treasury in a statement.

Prior to Wednesday’s actions, Treasury had invested 12.5 billion dollars in preferred stock of GMAC.

Treasury now owns 13.1 billion dollars in preferred stock in GMAC, through purchases and the exercise of warrants, and 35 percent of the common equity in GMAC.

GMAC, which provides financing for GM and Chrysler and their customers, lost 5.3 billion dollars in the first nine months of 2009, as demand for cars remained tepid and previous loans continues to go sour.

The new capital will likely allow GMAC to avoid placing its ailing mortgage unit, Residential Capital LLC, or ResCap, into bankruptcy, and help the Detroit-based finance company return to profitability in the first quarter of 2010, according to some economists.

VietNamNet/Xinhuanet


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