Back in the days banks refused to loan money if the reason for it is to purchase a car. During those times it’s not considered practical for someone to loan for mere luxury. Such attitude of the banks has frustrated automakers like General Motors which naturally wanted for people to purchase their vehicles. Since financing was the main problem during those times GM has decided to solve the problem by becoming its own bank.
It was in the year 1919 when GM—world’s largest automaker and producer of quality GM grille insert --- created the General Motors Acceptance Corp., which has become the financial arm of the automaker. The GMAC was created to offer specialized credit to would-be car buyers of GM by means of installment plans.
GMAC has become a huge success and over the years has expanded its operations until it became the significant bottom-line contributor to GM’s profit. Then in the year 1985, GM’s executives decided to further expand the scope of GMAC and this time it will not only be loaning money to purchase cars but loan money to buy homes as well. To pushed through with this plan General Motors has purchased two large mortgage lenders and became the second largest mortgage bank in the US.
In the course of its operation GMAC has also became an expert player in the aspect of structured finance or derivatives. It has taken the income streams generated by all those car and mortgage payments and turned them into bonds through the “securitization” process wherein these bonds are sold off to investors. The GMAC can be considered as a perfect picture to portray an American corporation.
However lately, the GMAC has been painting not so good financial images. And last Thursday GM has succeeded in shaking up Wall Street when it announced that it was delaying the filing of its 2006 Annual Report by a couple of weeks. According to analysts, the reason for the delay was the significant exposure of GMAC to the ever popular subprime lending catastrophe. Just like the other players in the mortgage business, GMAC’s home lending subsidiary, ResCap has been caught in a rather awful situation when it allowed risky loans to homeowners with bad credits.
In a report by the Houston Chronicle, it pictured ResCap as the crown jewel in GMAC’s businesses holding $57 billion of subprime mortgages for investment or approximately 77% of its total loans held for investment. So where did ResCap failed?
The exposure that ResCap had in residual interest in mortgage securities was one of the cited caused of its problem since the loan defaults have turned out to be higher than expected and last Sept. 30 ResCap has recorded loss amounting to $1.4 billion. What will be the effect of such loss to General Motors?
General Motors although the world’s largest automaker is quite a big institution and its financial arm GMAC is in the same respect a huge financial player. But due to the not so clear nature of derivatives trading business, not even the mighty GM can exactly say up to what extent the ResCap problem can affect it. But various analysts said that it’s not going to be good for the automaker.
GMAC Insurance has recently announced that it’s “SmartParts Promise”, a unique program that guarantees the utilization of OEM parts short for Original Equipment Manufacturer or those auto parts produced by the same company as the vehicle --- in times of collision accidents to guarantee top-of-the-line repairs possible. The benefit is offered free of charge to all policyholders nationwide.
Basing on the study done by the GMAC Insurance, most policyholders particularly Americans are not aware whether their insurance companies specify the use of OEM parts for repairs. This subject remains trivial to most policyholders until they have an accident.
According to Sheena Poe, Chief Claims Officer at GMAC Insurance Personal Lines, "Drivers who have just been in an accident have enough on their minds. They shouldn't have to worry about the quality of their repairs. With our SmartParts Promise, we do the legwork, making sure drivers receive OEM parts, so they can focus on getting back to their lives."
In addition, it would also help for policyholders or even consumers to know the differences between aftermarket car parts and OEM parts since such knowledge would help them to obtain the best repairs that they can claim out from their auto insurance company.
OEM parts as explained earlier are auto components that are made by the same company, aftermarket parts on the other hand are made by another company as an imitation or replica of the original part. Aftermarket parts are usually less expensive than OEM parts but beware since these are imitations expect that its quality may not be as high as the OEM parts. Consumers are advised to purchase only aftermarket parts from reputable providers.
It also best to inquire from your insurance company if they allow the use of aftermarket parts or if only OEM parts are allowed so that you won’t have any problem when its time for you to claim for the repairs of your car. GMAC Insurance is one of those few companies that specify OEM parts. It allows its policyholders to have their cars repaired using the auto parts built by the same company. In terms of body shop, policyholders are given the freedom to choose the or use or use a certified Gold Metal shop and have the opportunity to be granted with a lifetime guarantee on repairs.
Why you should carefully choose the provider of aftermarket parts? Not to belittle the quality of aftermarket parts, there are also “not-so-original parts” produced by some of the reputable auto parts maker in the industry that can match that of the OEM. Unfortunately, quality aftermarket part providers are few that one has to be very careful or else you would just jeopardize your safety and the performance of your car.
Here are some of the reasons why GMAC Insurance encourages its policyholders to choose OEM parts:
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