GMAC cleared to join Fed commercial paper plan

DETROIT (Reuters) - GMAC LLC, the auto and mortgage finance company, on Tuesday said it had been approved to use the commercial paper funding facility created earlier this month by the U.S. Federal Reserve with the aim of easing pressure on the corporate credit market.

“We were approved to participate,” GMAC spokeswoman Gina Proia said.

Detroit-based GMAC, which is 51-percent owned by Cerberus Capital Management and 49-percent owned by General Motors Corp, was granted approval of its application “recently,” Proia said.

GMAC has been pulling back from auto financing in both North America and Europe in recent weeks, citing the difficult credit markets. The company said on Tuesday that it would stop making new consumer car loans in seven European countries.

Approval to use the Fed funding facility comes at a time when U.S. automakers and their affiliated finance companies are asking for a range of government assistance, including the purchase of bad auto loans through the $700 billion program asset-purchase program controlled by the U.S. Treasury.

Cerberus, which owns Chrysler LLC, also has been talking to GM about a merger of the two auto companies, according to people familiar with those discussions.

GM has asked the government for $10 billion in capital and other assistance to support that proposed merger, people with direct knowledge of the talks said.

Proia said GMAC would participate in the Fed’s borrowing window through its New Center Asset Trust, a $10 billion asset-backed commercial paper facility.

But she said GMAC would not discuss in a more detailed way how it planned to use the borrowing facility.

“We are not discussing in any detail our participation in the Fed program,” she said.

Cerberus purchased its stake in GMAC in 2006 from GM. The company lost $2.48 billion in the April-June period and has posted losses for four consecutive quarters.

Reporting by Kevin Krolicki; editing by Carol Bishopric