Conversion of GMAC to a bank 'will not spur car purchases'

New York: Several anal-ysts expressed scepticism on Friday that the Federal Reserve's decision allowing GMAC Financial Services to become a bank holding company would spur many more people to buy cars.

Daniel Alpert, managing director at investment bank Westwood Capital, said so many consumers already are struggling with existing debt that he doubts the Fed's action will cause them to take on still more.

"I don't think it will suddenly increase auto credit," Alpert said.

The Fed approved GMAC's request on Wed-nesday to become a bank holding company, authorising it to apply for a portion of the Treasury's $700 billion (Dh2,570 billion) bailout fund and receive emergency loans directly from the Fed.

The move marks a loss of control for GMAC's owners, General Motors Corp and Cerberus Capital Management.

Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a blow to General Motors' own chances for survival.

Big-ticket items

The Fed cited 'emergency conditions' in justifying its decision.

The Fed said its move "would benefit the public by strengthening GMAC's ability to fund the purchases of vehicles manufactured by GM and other companies and by helping to normalise the credit markets for such purchases."

But some analysts said they doubt the Fed will achieve that goal.

They point to the deteriorating economy and debt-laden consumers' inability or unwillingness to borrow more for big-ticket items such as cars, trucks and sport utility vehicles. Tighter lending standards have shut out many buyers.

"I don't think the Fed decision, per se, will have any impact on the consumers' willingness to buy cars," Bert Ely, a banking industry consultant in Alexandria, Virginia, said.

"For many consumers, the willingness to buy a car - new or used - is largely a function of their ability to get affordable financing."

Christopher Whalen, managing director of Institutional Risk Analytics, said would-be customers are simply not buying cars.