The government on Wednesday was moving ahead with a fresh multibillion dollar cash infusion to stabilize auto finance company GMAC Financial Services as it continues to struggle with big losses in its home mortgage unit, according to a person with knowledge of the matter.
The person, who spoke on condition of anonymity because discussions weren't complete, says the government aid would range around $3 billion. That would be less than the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company.
Shoring up GMAC has been a major component of the Obama administration's massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles. GMAC has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government.
Special: Get Sarah Palin’s New Book – Incredible FREE Offer -- Click Here Now.
But GMAC also operates a large residential mortgage business, ResCap, which was battered by the recent housing collapse. GMAC was obligated by the Treasury Department to raise $11.5 billion in additional capital earlier this year after failing the government's stress test for banks, largely because of ResCap's big losses. However, GMAC had difficulty raising money because of its financial woes, making an extra government infusion necessary.
An announcement of the latest injection of aid could come late Wednesday or on Thursday.
Treasury spokesman Andrew Williams declined to offer details, but said: "Treasury is in discussions with GMAC to ensure its capital needs as determined ... by the stress tests are met."
GMAC spokeswoman Gina Proia said Wednesday that GMAC is weighing options for reviving ResCap. It is also reviewing its broader business as it tries to improve its financial health and eventually repay the taxpayer money it has already received.
Michael Carpenter, who succeeded Alvaro De Molina as the company's CEO in November, has said the company would need no more than $5.6 billion in aid. Lawmakers estimated the company would receive between $2 billion and $5 billion in additional aid.
Despite the government support, GMAC still remains on shaky financial ground. Last month, it reported a quarterly loss of $767 million, though the results were an improvement over a giant loss a year ago. ResCap lost $747 million during the third quarter as homeowners continued to default on their mortgages in large numbers.
GMAC has also been hurt by the rapid decline of the U.S. auto industry after sales crumbled due to the recession and financial woes of the big automakers. Sales of cars and trucks were down 24 percent through November compared with the same part of last year.
Despite the drop in auto sales, GMAC's auto lending business has shown some signs of revival. The auto financing division earned a profit of $395 million during the third quarter. The company's online consumer banking unit, Ally Bank, has also been a bright spot by bringing in billions of dollars in new deposits by offering relatively high interest rates.
AP Business Writers Candice Choi and Dan Strumpf in New York contributed to this report.
© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.