Friday, November 25, 2005

Saving General Motors: 105

GMAC: The cash cow?

It is reported to be one of General's best: the finance arm of the company; an easy extension by which cars are sold, General Motors Accetance Corporation - GMAC; but what should the company do with this cash cow?

Rumors abound as to the company's goal for this division, now that the company is in the throes of a massive reorgiznation, but if I may offer a suggestion: Sell the majority stake in the company!

Sure: General Motors will still be able to use this entity to finance their purchases but with this company being a complete seperate entity, it can be used by others to buy other cars; and General Motors will benefit from these transactions. After all, wouldn't it be sweet to get a few dollars on other companies' cars: Ford, Toyota, Nissan and all the rest?

Another reason for off-loadig GMAC is liabilty. If the economy takes a down-turn, and people cannot pay their auto loan bills, then recall is their last recourse and GMAC can find themselves with a lot of used-cars on their hands. That is good news for buyers but not for a company who is trying to sell new vehicles. I hear the used-car market can be a racket!

General Motors can now use this new found money to rebuild their core business, which is building cars. On second thoughts, well, they should save some of it and rather than give rebates, simply sell the cars cheaper; they may have to do it soon anyhow...

So, General Motors: Sell the majority stake in GMAC, and get back to the production line;

Ditto for GM-Real Estate division...

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