Deja Vu - All Over Again

General Motors, facing up to the reality that their vehicles simply are not moving, is struggling with the near-impossibility of closing dealerships - now completely redundant, where Japanese dealerships easily outsell them by four-to-one - in an effort to fulfill one of the targets for change they had identified to the U.S. Senate. It isn't quite as easy as the proposal indicated, since there are state laws that intervene.

On the other hand, with $5-billion of preferred equity via Washington to the corporation's lending arm, GMAC Financial Services LLC, it is undertaking another tactic entirely. Exploring the wisdom of tantalizing potential customers hanging back through fear of committing suddenly-scarce funds to purchasing their vehicles by dangling before them a deal they cannot possibly ignore.

Zero percent financing sounds really, really good, and it will attract the attention of many purchasers, the eager ones and the reluctant ones, hoarding what little expendable income they have. Made all the more attractive by truly juicy offers of extending credit to people who at the best of times would be turned away because of their shaky credit ratings.

GMAC has decided that credit rating scores for retail customers of 621 or higher would be more than acceptable. In one fell swoop eliminating the tried-and-true guidelines requiring a credit score of 700. Bearing in mind that the median U.S. credit score is stated to be 723. Placing that now-acceptable 621 score squarely in "subprime" territory.

General Motors, struggling under its $7.9-billion loss reflecting poor business for the past fifteen months of fingernail-gripping hanging over the edge of that precipice is obviously willing to try anything to regain its collapsed market. Its 41% market plunge resulted in part from its cautiously-correct stance in denying financing to would-be purchasers with too-low credit ratings.

This overture to anxious consumers will turn their fortunes around neatly, they feel. But hasn't this territory been visited before, and quite lately, in the home mortgage business? Persuading people that despite low-to-none down payments, and insufficient credit due to low earning potential they could nonetheless become home owners?

Isn't the collapse of the real estate market, following the trail of worthless mortgages and abandoned homes in large part responsible for the financial melt-down in the United States, let alone world-wide, where all that liquidity-challenged paper plugged up capital markets?

Is this really the best that the high-paid executives at GM and GMAC can come up with, to unload their inventory on chancy lending practises? Are they ready to begin the agony of repossession and being left holding doubly-worthless products? To grovel again before the U.S. Congress for more liquidity so they can explore another tack?

The American taxpayer is turning out to be an eminently exploitable resource.