The government finally bit the bullet — it agreed to shell out $17.4 billion from the TARP fund to enable GM and Chrysler to operate through March. But what will happen to improve the auto finance sector in that timeframe? Very little, I’m afraid.
You see, during the Congressional hearings a couple weeks ago, the CEOs of the Big Three made it clear that any loans granted would be used to pay for day-to-day operations. When asked outright whether some funds might be earmarked for dealer floorplan loans, the answer was “no.”
So for now, the dealer situation will only worsen. Chrysler, for one, said earlier this week that it may temporarily halt floorplan lending. And with factories idling and vehicle sales dropping across the board, dealers face greater challenges to keep their doors open.
As well, there has been little, if any, change in the credit markets to indicate a let-up of terms in the retail financing market. To qualify for GMAC loans, consumers must have at least 700 Ficos. Loans, in general, are a lot harder to come by. And, unfortunately, the $17.4 billion worth of loans to the automakers won’t change that.
So where does that get us? Well, the domestic automakers may survive another few months, but without auto loan availability, they probably won’t sell many cars. In other words: I doubt they’ll make it much longer.
