Industry welcomes ‘creative solution’

The $2 billion dollar bailout package for dealership finance will not save all dealerships admits the Treasurer of the Commonwealth.

Wayne Swan has made it clear only qualifying viable dealerships will be eligible for the assistance.

“The SPV will be designed to support viable businesses,” Swan warns. “It will not seek to provide an artificial lifeline to unviable dealerships.

“The eligibility criteria that will apply will be fair and transparent.”

Wayne says transitional arrangement only and will remain in place until viable dealers establish new funding arrangements. Financiers who have refinanced GE or GMAC financed dealerships since those companies announced their withdrawal from the market will be eligible for SPV funding provided they meet the SPV’s eligibility criteria.

The SPV will operate with Government support, refinancing dealerships for a period of 12 months, after which its funding level will run down

“It is therefore possible that in light of the overall economic climate, some unviable dealerships will leave the industry,” he says.

The SPV will be established with the support of leading Australian banks to provide liquidity to car dealer financiers who have encountered financing difficulties as a result of the global financial crisis.

The SPV - which will be established as a financing trust - is a private sector solution which will provide liquidity to car dealer financiers through the securitisation of eligible loans provided to car dealers. The SPV will be implemented by 1 January 2009.

This announcement follows a further meeting today with the Chief Executive Officers of ANZ, the Commonwealth Bank of Australia, the National Australia Bank, and Westpac. At this meeting an agreement was reached to provide critical liquidity support to car dealerships that have up until now been financed by GE Money Motor Solutions and GMAC.

The overall size of the SPV will need to be around $2 billion. The Government will provide support to the SPV in the form of a guarantee expected to cover a minor proportion of the securities issued.

Credit Suisse is providing the necessary technical support to develop the SPV. Treasury will continue to work closely with the major banks, Credit Suisse and its advisers over the next three weeks to finalise the details of the SPV and to put it into effect.

The SPV will be available to both new vehicle and mixed vehicle dealerships that trade cars, trucks, motorbikes, boats, caravans and other commercial vehicles as long as they are currently financed by GE Money Motor Solutions or GMAC.

The financing that will be available under the SPV will be for wholesale floorplan financing only. Retail financing will continue to be available through banks, building societies, credit unions and finance companies.

Swan thanked those involved in pulling the SPV together. “I would like to take this opportunity to thank the CEOs of ANZ, the Commonwealth Bank of Australia, the National Australia Bank, and Westpac, along with representatives of the automotive industry, in particular the MTAA, for the overall co-operation and support they have provided to allow this proposal to proceed.

“Today’s announcement will help ensure the long-term viability of the automotive industry and forms part of the Government’s commitment to protect jobs in this vital industry and right across the Australian economy.”

VACC executive director David Purchase, “This is most welcome news for new car dealers, in particular, and the Australian economy as a whole.”

“Today’s outcome is a creative solution to the problem, and the Federal Government and banks involved are to be commended.

“The 60 day notice period provided by GMAC and GE Money was too short, and VACC was among the many voices calling for a deadline extension,” Purchase added.

The Motor Trade Association of South Australia MTA directorJohn Chapman pointed out the position GE and GMAC had left dealers in.

“The decision by GE and GMAC finance companies to pull out of Australia with two months notice put their client dealers in a diabolical situation.”

“From a national perspective, there was a real concern from the industry that the number of dealers who hadn’t been able to secure alternative finance before the end of the year would be left with no option but to close their doors,” he said.

“The package announced by the Federal Treasurer Wayne Swan will mean that many car dealers across the nation will be able to continue business,”
FCAI Chief Executive Andrew McKellar joined in welcoming the package.

“These are complex issues but the Government has acted quickly and effectively in an effort to head off a potential crisis,” he said.

“The bottom line is; this response will save jobs in the industry,” McKellar said.

“Our objective now is to ensure a managed transition for those seeking new sources of finance; to stabilize the market and prevent the unnecessary withdrawal of any other credit providers,” he said.

Source: Autofile