An exciting new chapter for GMAC
In April 2006, GM announced that a definitive agreement had been reached to sell a 51 percent equity interest in GMAC to a consortium of investors led by Cerberus Capital Management, one of the world’s leading private equity firms. As part of the transaction, GM and GMAC will enter into a 10-year agreement in which GMAC will remain the exclusive provider of GM’s subvented auto finance programs around the world and will continue to provide GM with the same broad range of auto financing products/services as it has in the past. The transaction is expected to close in the fourth quarter of 2006.
For some time now, GMAC has been pursuing its strategic vision of becoming a premier global finance company. We have been successful in establishing leadership positions across all major sectors of our business:
- We have maintained our #1 position in auto finance;
- We have become a top player in the mortgage industry;
- We are the largest provider of extended warranty and dealer inventory insurance; and
- We have tremendous asset origination and world-class servicing capabilities across our global franchise spanning nearly 40 countries.
However, despite these major business strengths, credit rating pressures have impaired GMAC’s access to low-cost funding and have constrained the company’s growth. As a result, GMAC has found it increasingly challenging to carry out its strategic vision.
The consortium’s large-scale equity investment in GMAC will help us overcome this challenge. As the sale of a controlling interest in GMAC will delink the GMAC credit rating from that of GM, we expect the transaction to improve our access to cost-competitive funding and renew profitable growth opportunities. And, although GMAC’s credit rating will no longer be linked to the GM rating, the strong GM-GMAC strategic relationship will be maintained—as will the significant benefits which GMAC derives from this relationship.
In short, by combining GMAC’s competitive business strengths with the financial strength of the Cerberus-led consortium, GMAC will be well-positioned to realize its strategic vision. GMAC now stands ready to move from a defensive game plan to playing offense again, better positioned to play a key role in GM’s turnaround, better positioned to deliver superior value to our investors, better positioned to resume our track record of long-term, profitable growth.
Sincerely,
Eric A. Feldstein
Chairman
