Shares in General Motors (GM) jumped 13 per cent on 26th December following the news that the Federal Reserve had accepted GMAC's plans to become a bank holding company.

In an interview with Bloomberg, Kimberly Rodriguez, principal of Grant Thornton, said the move would benefit GM as it would facilitate the purchase of vehicles by both dealers and individual car buyers.

The Fed justified its decision to approve GMAC's conversion by pointing to the global financial crisis and also highlighted the fact that GMAC's future is very much tied to that of GM.

There were concerns that GM dealers would be hit by a potential default by GMAC as it would deny them a major source of credit.

However, GMAC now has access to government loans to shore its position, while GM will also be bailed out by the government to help save it from collapse and ensure jobs are not lost.

GMAC will now change hands as its new status as a bank means it can no longer be owned by GM and private equity firm Cerberus Capital Management.

Source:

GM Climbs 13% as GMAC Bank Bid Eases Concern on Loans, 26/12/08

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