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GM Chrysler to continue support of CU loan program
LANSING, Mich. (6/2/09)--With General Motors (GM) filing bankruptcy Monday and Chrysler set to come out of its bankruptcy restructuring this week, how do these events affect credit unions' auto loan program? The bankruptcies won't affect credit unions' incentive program, Invest in America, says David Adams, president/CEO of cuCorp and the Michigan Credit Union League. "We're a preferred supplier with Chrysler," said Adams, who told News Now that the same terms of the Invest in America contract will apply. "Their communications have made it clear that we will receive continued support through the contract and through the bankruptcy process. "Chrysler announced today [Monday] it would extend its terms with us to June 30," he said, terming the extension "a very rich offer for members." The program had been slated to end May 31. At GM, "our members will receive supplier pricing through the end of the year," Adams said. "Credit union discounts will remain in place," and, he noted, "credit union financing remains even more important to both GM and Chrysler." He emphasized "the partners' relationships will get stronger through this." Credit union members in Michigan have been hit hard by the auto manufacturers' problems. In the state, 24 credit unions are focused on the Michigan Big Three and their supplier companies. All have felt the pinch of cutbacks and unemployment, Adams said. The closure of a stamping plant in Grand Rapids this month was previously announced and "people were aware of it already," he said. Of the 14 dealers that will be affected by closures by 2012, seven are in Michigan. Of those seven, two are on standby. "The pain is continuing in temporary and permanent job losses," Adams said. "However, we're hoping that many plants will be redeployed in the automotive industry and many jobs brought back." He noted that not all jobs would return. The current 12.8% unemployment rate in the state is expected to increase. "We could very well see a 15% unemployment rate. "We've had eight years of recession and a steady stream of job losses in manufacturing. People have been slowly preparing for this [the closures]. With GM and Chrysler reinventing themselves, they likely will be smaller companies and employ fewer people." Michigan's credit unions serving the industry have become very diversified. One of the largest credit unions with the auto industry, Genesis CU, served employees in GM's truck and motor segments. It merged with USA CU and diversified. Each credit union had about $500 million in assets. "They are nicely diversified," Adams said. DFCU, a Dearborn-based credit union that serves Ford employees, has become a community credit union with lots of select employee groups (SEGs). It also merged with a state-chartered credit union, CapComm. And Research FCU, which served the GM tech industry in Warren, has merged with Community Choice and is no longer singularly focused on the auto industry, he said. "We've seen across the board, credit unions preparing for this. They are well-positioned and diversified. They will still have high loan losses and chargeoffs but they show strong numbers," he said. (See "First-quarter growth strong for Michigan CUs" in today's News Now.) In addition to planning and diversifying, credit unions have become very good in loan underwriting because they've seen the cycle for years. "But there's a lot more to come," Adams said. "While the rest of the country will be celebrating the national economic recovery next year, Michigan will be working through an extended recession for years to come. "It's a testament to credit unions that they are helping with auto loans and making small business loans. In the midst of the economic turmoil, credit unions show their strength by filling the voids and helping members and their communities," he noted.
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