GMAC's new owner intends to keep most jobs in Winston-Salem
WINSTON-SALEM (MCT) — The city felt yet another economic tremor yesterday with the news that GMAC Inc.'s local operations are being sold to an investment group.
However, unlike the pending closing of Dell Inc., with a loss of more than 900 jobs, and the shutdown last month of Pace Airlines and its 300 jobs, it appears that the effect on GMAC's work force of 905 will be minimal.
The principal buyer of GMAC's U.S. consumer property-casualty insurance business is American Capital Acquisition Corp., a unit of American Capital Partners LLC of Hauppauge, N.Y.
The deal includes a 25 percent investment in American Capital Acquisition by AmTrust Financial Services Inc. That investment is valued initially at $42.5 million over three years.
The overall cost of the acquisition was not disclosed. The deal is subject to regulatory approval and is expected to close in the first quarter.
"The intention of both groups is to keep the GMAC operations in Winston-Salem and keep the majority of management and employees there," Hilly Gross, a spokesman for AmTrust, said yesterday.
Mike Stoller, a spokesman for GMAC, said that it's expected that the majority of the company's team will transition to ACAC.
AmTrust sells specialty-property and casualty-insurance products.
"It's clear from this particular action that the GMAC of the future considers its principal business activity to be retail banking, particularly with Ally, and not property-casualty insurance," said Tony Plath, a finance professor at UNC Charlotte.
If the groups keep the bulk of the GMAC operations here, it will be the second potential major jobs hit the community will have dodged regarding its financial-services sector.
On Sept. 10, Wells Fargo & Co. said it would not only keep 2,800 Wachovia Corp. jobs in Forsyth County as part of merging the banks, but also add 150 jobs over two years, primarily in wealth management, trust and branches.
AmTrust said in a regulator filing that American Capital was formed by the Michael Karfunkel 2005 Grantor Retained Annuity Trust. Karfunkel also serves as the chairman of AmTrust.
Barry Zyskind, the president and chief executive of AmTrust, said that the deal provides "immediate access to a new distribution force of 10,500 agents that will be equipped to cross-sell our AmTrust products. Additionally, this investment will generate substantial fee income."
The division was sold in November 2006 as part of General Motors Corp.'s sale of 51 percent of GMAC Financial Services to a consortium of investors led by Cerberus FIM Investors LLC, a private-investment company based in New York.
At that time, GMAC had 1,179 local employees. The division has had two job cuts this year.
"This transaction is part of GMAC's effort to refocus resources on strategic operations and restore financial performance," Stoller said.
The company has reported losses in seven of the past eight quarters.
He said that the division is being sold to an owner "that has robust operational and technological capabilities and is committed to building a U.S. personal-insurance footprint."
MORE ON THE DEAL
GMAC Financial Services
The Winston-Salem office of GMAC at Spruce and Fifth streets employs more than 900 people. It is one of the leading writers of auto coverage through a network of 10,500 independent agents in 12 core markets. The division handles consumer property and casualty insurance and had net written premiums of more than $1 billion in 2008.
Here is a quick history of the company's ownership:
Security Life And Trust Co.
The company was founded in 1920 in Greensboro and moved later that year to Winston-Salem.
Integon Corp.
Security Life formed a holding company in January 1969 to handle high-risk drivers.
General Motors Corp.
GM bought Integon Corp. in October 1997 for $778 million in cash and assumed debt — one of the biggest deals in Winston-Salem's history at the time. Integon's name was changed to GMAC Insurance Personal Lines in January 2000 as part of GMAC's plan to broaden its insurance products and services.
Cerberus FIM Investors LLC
In December 2006, GM sold 51 percent of GMAC Financial Services to a consortium of investors led by Cerberus and including Citigroup Inc.
American Capital Acquisition Corp.
The investment group includes a 25 percent stake of AmTrust Financial Services Inc. Hilly Gross, a spokesman for AmTrust, said the intention of both groups is to keep the GMAC Personal Line operations in Winston-Salem and the bulk of local management and employees intact.
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