The Federal Reserve has infused another tranche of capital to GMAC with the approval of additional $6.5 billion bailout money. However, the beleaguered financial company appears to be almost relying purely on government funds to keep it afloat, and does not show any clear signs of making a turnaround.
The government has already shelled out huge amounts of bailout money to ailing companies in light of this economic downturn that hit the country recently. GMAC has yet to show signs of recovery and was the only one of 19 major financial institutions that received financial assistance from the government which has yet to pay back its loan. In the third quarter of this year, GM’s financial arm reported a $675 million loss. A lot of creditors have already lost confidence on GMAC’s ability to rebound and many are asking the wisdom behind the government’s continued rescue efforts.
The once mighty financial company emboldened by fresh capital from the government is now offering its depositors higher than industry norm interest rates to raise more money. Experts see GMAC’s recent fund-raising manoeuvre as reckless and risky and disprove of the company’s decision to use taxpayer’s money as leverage.
Supporters, however, cite a massive backlash to the economy if GMAC was left to its own devices considering the fact that being a primary financing company of General Motors and Chrysler; it still remains as one of the country’s top employers.
Ford is one of the few fiercely independent major companies in the US who refused government financial aid, appears to be the only man standing among domestic car manufacturers, being the sole US car company that reported profits in the third quarter of this year. Ford was able to achieve this largely in part by increasing its market share in overseas markets such as North America, South America, and Europe.
Ford had to be more resourceful and creative than US companies who benefitted from US government bailout packages, and was successful in developing and implementing highly effective strategies and schemes that helped them keep their heads above water despite tough economic conditions. General Motors like its financial partner GMAC, despite receiving billions of dollars in federal aid, still have yet to figure out a way to get themselves out of their financial mess.
President Barack Obama, frustrated with the ineptitude of some auto companies and their inability to make good on their promise to return to profitability, warned that the days of bailout money is numbered and that government will not hesitate to pull the plug on non-performing business enterprises.