GMAC to Sell Up to $55 billion in Auto Loans to Bank of America

DETROIT and CHARLOTTE, NC – General Motors Acceptance Corp. (GMAC), the financial services subsidiary of General Motors Corp., and Bank of America today announced a long-term strategic financing agreement regarding GMAC’s U.S. automotive retail assets. The agreement calls for a committed purchase by Bank of America of up to $55 billion worth of GMAC retail automotive contracts over a five-year period, commencing July 2005 and concluding June 2010.

Bank of America will make an initial purchase of $5 billion. In each of the agreement’s five fiscal years (July 1-June 30), Bank of America will purchase up to $10 billion of GMAC’s full spectrum of active U.S. retail auto finance contracts. GMAC will continue to service the auto finance contracts.

The agreement expands the existing relationship between GMAC and Bank of America. GMAC will be able to accelerate its planned transition from an “originate and store” to an “originate and sell” U.S. auto finance business model, while Bank of America makes a significant investment to grow its automotive finance business.

“This agreement allows Bank of America to leverage our low cost of funding, risk management expertise and strong lending base to the benefit of an important client,” said Tim Russi, president of Bank of America Dealer Financial Services — the auto, motorcycle, marine and recreational vehicle financing unit of Bank of America. “Our strategic investment in systems, data, people and processes over the past several years has positioned us to capitalize on this opportunity and significantly expand our share of the auto financing market.”

Sanjiv Khattri, GMAC’s executive vice president and chief financial officer, said, “We are very pleased to enter into this landmark agreement with Bank of America, our long-time partner in so many innovative transactions. This agreement leverages GMAC’s world-class origination and servicing capabilities with Bank of America’s world-class funding capabilities. It allows GMAC to fulfill its strategic mission to finance more GM vehicles, without undue strain on the balance sheet. This further advances GMAC toward its ‘originate and sell’ business model in U.S. auto finance, providing us far greater flexibility to reallocate capital and further diversify the business portfolio.”