The New Yorker yesterday released a 57-page memo Lawrence Summers wrote to President-elect Barack Obama on Dec. 15, 2008. The memo is interesting for many reasons, but one that applies to our sector is Summers's acknowledgement that the captives matter significantly to the automotive industry.

Summers outlines in the memo how the incoming Obama administration will have to rescue the auto industry. He writes that among the weaknesses in the auto industry at the time are the captives:

The captive finance companies play a crucial part of the start and share their own distinct challenges: For example, GMAC finances approximately half of GM's retail sales. Given their capitalization and the state of the financing markets, they cannot provide meaningful amounts of credit on attractive terms to consumers. Efforts to restructure GMAC as a bank holding company will require close coordination between the Fed, FDIC and Treasury as well as a meaningful restructuring of its balance sheet.

What is interesting about this excerpt is the degree of awareness of the problem GMAC specifically presented to GM at the time. I know that eventually Obama made it clear that fixing auto finance would have to be a component of fixing the auto industry -- and he did fix the auto industry -- but the memo implies that weaknesses within the captive financing world appeared to have been more pronounced than was known at the time.