Today General Motors warned that the future looks so bleek for them, billions of dollars in government aid may not help them out. Read more here. But the looming question is, why is GM doing so bad? Do they have bad cars that nobody wants to buy, or do they just have bad management? I believe it is the financial arm of General Motors, GMAC that has driven GM to the brink of collapse.

GMAC is the financial arm of General Motors that offers insurance, real estate, and loans. Nothing to do with cars. On November 20th, 2007, UAW President Ron Gettelfinger expressed concern about GMAC’s exposure to the subprime market. A year later, on November 6th, 2008, in an article posted by www.thedetriotnews.com, GMAC posted a $2.52 billion third quarter loss. GM, which had sold 51% share in GMAC earlier in the year, is still responsible for 49% or $1.2 billion in losses. The previous second quarter loss for GMAC was $2.5 billion.

There is no auto bailout, this is a bank bailout. Estimated at having $189 billion in assests, GMAC is the 11th largest bank in the United States.

Decades of poor management have led to this. Decades of being stubborn have led to this. Decades of saying, we are doing just fine, has led to this. Bad businesses are supposed to fail, it is how the system is designed, it does not matter how big or small you are.