GM’s former lending arm, now known as Ally Financial Inc., lost $16.5 billion in its mortgage business from 2007 to 2009. GM sold 51 percent of Detroit-based GMAC to private-equity firm Cerberus Capital Management in November 2006 as the nation’s biggest automaker ran low on cash.
Since then, GM has had to rely on outside lenders, including Ally, which is 56 percent owned by the U.S.
“The thing that brought down GMAC was its … subprime mortgage business,” said Joe Phillippi, principal of AutoTrends, a consulting firm in Short Hills, N.J. “But I think they will manage this smartly. This is going to be solid, careful measured growth.”
As long as GM is majority-owned by the government, it shouldn’t be in subprime lending, said John Berlau, a policy director at the Washington-based Competitive Enterprise Institute, which promotes limited government.