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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

GM rolls out new financing deals

GMAC bailout prompts rates as low as zero percent

James Forrest, left, listens to salesman Bob Chatlos discuss the options on the new  Chevrolet Suburban he bought  Tuesday,  in Willoughby Hills, Ohio. GMAC, rescued by $5 billion in federal aid, plans to use some of the money to make vehicles more affordable to more customers.  (Associated Press / The Spokesman-Review)
By Shawn Langlois MarketWatch

SAN FRANCISCO – Wasting no time, General Motors Corp. announced Tuesday attractive financing deals on new cars and trucks after the struggling automaker’s lending unit said it received a much-needed federal lifeline.

GM’s stock jumped as much as 11 percent to $4 before closing up 5.6 percent at $3.80. Still, the Dow Jones Industrial Average component is down 85 percent since the beginning of the year.

The Detroit giant is offering zero-percent financing for up to 60 months on the 2008 Chevy Trailblazer, the GMC Envoy and three Saab models.

The 2008 Buick Lucerne sedan is now available with 0.9 percent financing for up to five years, while various other deals can be had up and down the GM product lineup, including on 2009 models like the Chevy Cobalt and the Cadillac CTS.

The announcement comes a day after GMAC Financial Services said it has received $5 billion in funds from the U.S. government’s $700 billion bailout program.

The move is designed to help GM sell new cars and trucks and make good use of the funding that the White House earlier this month agreed to extend to both GM and closely held Chrysler LLC.

Promotions aren’t the only tool that will be used to boost plunging sales. GMAC said that as a result of the funding, it will lower its minimum credit-score requirement for retail consumers to 621 compared to the 700 minimum level set two months ago.

“The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers,” President Bill Muir said in a statement. “We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis.”

GM blamed a big part of the company’s sales meltdown in recent months on prospective customers’ inability to obtain financing, pointing out that less than 30 percent of buyers have a credit score above that minimum level.

The more lenient standards should provide a tailwind at a time when the automotive industry is facing the prospect of dismal December sales – a seasonally adjusted annual rate of fewer than 10 million vehicles.

However, it will take more than incentives to bring buyers back to the showrooms, according to Edmunds.com analyst Jesse Toprak.

“As questions about the economy remain unanswered, many consumers are reluctant to respond to the incredibly generous deals available on new cars,” he said.

Total U.S. auto sales dropped by more than a third in November, scraping in at the lowest annual rate in 26 years. GM and Chrysler led the declines with drops of more than 40 percent each.