Over and above the recent $17.4 billion bail-out package to rescue GM, Chrysler and Ford, the federal government on Monday planned to release $6 billion for stabilizing GMAC LLC – the struggling financing company of GM, co-owned by Chrysler’s owner, Cerberus. 

The US Treasury Department has said that a separate program had been set up within the Troubled Asset Relief Program, for making investments intended for the auto industry, thereby implying the government’s unrestricted role in the industry.

According to the bail-out terms for GMAC – which has been approved for becoming a bank holding company - $5bn in shares in the company will be bought by the US Treasury, and the loan to one of GMAC’s co-owners, GM, will be increased by an additional $1 billion.

The increased loan will cater for GM’s purchase of shares as part of GMAC’s reorganization, as a result of which it will be able to offer funding to prospective vehicle buyers, with an aim to ease the severity of the economic slump. 

Traditionally, GMAC has been providing the major part of financing for car buyers at GM dealerships, as well as for the loans that dealers rely on for their inventories of GM cars and trucks.

However, during the past several months, the deepened credit crisis and GMAC’s falling ability to borrow has greatly constrained the company’s ability to financing of both the kinds.