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GMAC could bring more companies with it

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CHARLOTTE, N.C.-- GMAC leaders had to make an important decision by midnight Friday, and almost an entire day later no one outside the company knows what they did – or if they made a decision at all.

The Federal Reserve last week approved a request by General Motors’ finance company to become a bank, which would allow GMAC to get some of the government’s $700 billion bailout money.   The Feds’ goal is to keep GMAC out of bankruptcy, which would severely hurt GM’s chances of selling enough cars to stay in business.

"That would take car credit, inventory credit, and mortgages out of the commercial credit channel, and now is not the time the federal reserve wants that to happen," said UNC-Charlotte Finance Professor Tony Plath on Saturday.

But to become a bank and get the bailout money, GMAC had to make a debt-for-equity swap that would put debt holders at a greater financial risk.  “Companies have to pay their debt holders back.  They don’t have to give their equity holders anything,” if the company goes bankrupt, explained Plath.

 It’s unclear as of late Saturday whether debt holders agreed to the swap.

If they do agree, said Plath, there’s a good chance GMAC’s headquarters would move from Michigan to Charlotte.  The company’s CEO, Al  de Molina, a former Bank of America executive, still has a home in Charlotte.   The company already has a call center in the Queen City with roughly 200 employees.

It would be a smart move for the company, said Plath, because it could tap into a large pool of financial services workers – many of whom will be out of work soon.   The GMAC move could then lead to other financial companies -- like Morgan Stanley, whose boss also has ties to Charlotte -- moving here.

"It could indeed become a magnet for some of these new companies that are forming bank holding companies, because the labor force is so widely available and there's so many new people in the market that can run a financial services company at a higher level," said Plath.

Plath said it could be the silver lining to the cloud that’s been hanging over Charlotte since the financial meltdown earlier this year.

“It could be a better 2009 than what we originally thought,” said Plath.