The US Treasury said Thursday it had injected an additional 7.5 billion dollars into cash-strapped US auto finance giant GMAC to enable it continue providing loans to dealers and consumers.
The Treasury also said it could hold a 35.4 percent stake in GMAC, the former financial arm of ailing auto giant General Motors and now jointly owned by GM and leading auto firm Chrysler's parent Cerberus Capital Management.
The new investment, on top of an earlier five billion dollar injection, will support GMAC?s ability to originate new loans to Chrysler dealers and consumers and help address GMAC?s capital needs, the Treasury said in a statement.
"This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars," said Treasury Secretary Tim Geithner.
He said the recapitalized GMAC would offer strong credit opportunities, help stabilize the auto financing market and help in the recovery of the recession-hit economy.
GMAC won approval in December to become a bank holding company with greater access to state credit lines.
The Treasury?s new investment will be in preferred equity but the statement pointed out that as part of an earlier transaction, it had retained the right to exchange a loan it made to GM for common equity interests in GMAC.
"Treasury expects to exercise this exchange right in the very near future, after which it would hold a 35.4 percent common equity interest in GMAC," the statement said.
Of the new fund injection to GMAC, four billion dollars will be used to support its anticipated growth in Chrysler dealer and retail loans and the remaining 3.5 billion dollars to help it address capital needs, the statement said.
GMAC said recently it would become lender for new financing to Chrysler dealers and consumers, but it would not inherit Chrysler Financial's book of existing auto loans and leases.
GMAC reported earlier this month a first quarter 2009 net loss of 675 million dollars -- wider compared to the 589 million dollar loss in the same quarter last year.
Company officials are looking ahead for new revenue opportunities following the pact with Chrysler to provide financing to dealers and customers of the auto company that has filed for bankruptcy.