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New Lease Program at GM Shuns Loss-Making GMAC

In a pilot program U.S. Bank offers leases on select Cadillac, Buick, GMC and Chevrolet models.

by on Aug.05, 2009

2010 Cadillac CTS Sport Wagon

Leasing is particularly critical in the luxury segment where Cadillac is just introducing two new models.

General Motors Company has turned away from its preferred lender, GMAC Incorporated, and expanded its financing options for prospective buyers by turning to leases written by U.S. Bank. The leases are part of a pilot program that includes select GM vehicles sold in New York, New Jersey, Connecticut, Michigan and Ohio.

In addition, a lease on the all-new Cadillac SRX will be offered by U.S. Bank nationally. The pilot is currently planned to run through August 31, 2009, but will likely be extended if it works.

“GM and our dealers have done an incredible job without a leasing program throughout this difficult economic period, but we always knew that we would get back into leasing as it is important to a certain group of our customers,” said Mark LaNeve, GM vice president of U.S. sales.

GM dropped leasing one year ago when resale values plummeted, forcing a write-down by the finance company GMAC of the value of the vehicles coming off lease. Before dropping leasing, an estimated 25% of the sales of GM vehicles were accomplished by the financial device that allows lower monthly payments and use of a vehicle for a limited time compared to an outright purchase.

LaNeve estimated that the lack of leasing has cost GM one to two percentage points of market share, at a time when the company must prove it can halt its decades’ long decline in share, which is currently running at about 18%. Leasing is particularly critical in the luxury segment where Cadillac is just introducing two new models, SRX and CTS Sport Wagon.

Lease offers will be available on the 2009 Cadillac CTS, Chevrolet Malibu and Traverse. For 2010 models, leases will also be available on the Cadillac SRX, Buick LaCrosse and Enclave, the GMC Acadia and the Chevrolet Equinox. Monthly payments will vary, according to the customer’s down payment and the first month’s payment due at signing, but are expected to be “very competitive.” No security deposit will be required.

U.S. Bancorp (NYSE: USB), with $266 billion in assets, is the parent company of U.S. Bank, the 6th largest commercial bank in the United States.

GMAC itself remains severely challenged, as it continues to report huge losses because of loan defaults and the depressed housing and auto markets. In the second quarter of 2009 GMAC posted $3.9 billion loss compared to a net loss of $2.5 billion in the second quarter of 2008. Results included a $1.2 billion tax charge caused by converting to the financial holding company to a corporation. To date, GMAC Incorporated has accepted $13.5 billion in U.S. taxpayer funding. The government has a 35% stake.


Repo Pilot? GM Bankruptcy Judge Cancels Leases for Seven Gulfstream Business Jets

Everybody loves to hate corporate jets, even though the U.S. leads the world in making them, which provides high paying manufacturing jobs and billions of dollars in exports.

by on Jun.19, 2009

Gulfstream Fleet the G4 and G5 are the bigger ones

The G4 and G5 jets are high flying, long range aircraft that easily outperform commercial jets.

Yesterday Judge Robert E. Gerber of the United States Bankruptcy in New York granted GM’s request to invalidate its leases on seven corporate jets and its huge hanger at the airport in Wayne County, Michigan.

Since the motion was unopposed — would anyone out there seriously consider arguing for corporate jets in the current political environment? — the hearing was short.

The Honorable Gerber ruled that GM could reject the leases under section 365 of the U.S. Bankruptcy Code, effective on the date of GM’s surrender of the planes and their hanger. AVN Air, LLC (AVN), General Electric Capital Corporation (GE Capital), SunTrust Equipment Finance & Leasing Corp. (SunTrust), Wayne County Airport Authority  (WCAA) and US Bank were the business entities holding the leases. 

The jets in question – two Gulfstream G5 models and five G4 models – are among the most expensive private aircraft in the world, ranging in price from $40 million to $50 million each when new, depending on optional equipment and custom interiors. Determining the fair market value of the jets in the currently depressed market for aircraft is difficult since few are selling.