General Motors Corp. cleared a second hurdle this week toward its recovery following the U.S. Treasury Dept.’s cash infusion late Monday of $5 billion into troubled automotive- and housing-lender GMAC LLC.

Treasury also loaned GM $1 billion to buy stock in the finance company.

The money should help the firm return to a more normal volume of financing and help stabilize the automotive industry, GMAC President Bill Muir says in a statement.

GMAC immediately is loosening its restrictions on consumer automotive lending, which limited loans to customers with credit scores of 700 or higher. The firm now is extending financing to car buyers with scores of 621 and higher.

“We will continue to employ responsible credit standards but will be able to relax the constraints we put in place a few months ago due to the credit crisis,” Muir says. “We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the U.S.”

The credit crisis and GMAC’s ensuing policies slammed GM, which owns 49% of the company, with private-equity-firm Cerberus Capital Management LP, owner of Chrysler LLC, controlling the remaining 51%. The lack of available credit hurt U.S. light-vehicle sales, which plunged 41.3% in November.

GM says GMAC financed more than 66% of its U.S. sales in November 2007. That number dropped to less than 1% in the same month this year.

“In the short term, the move will be beneficial,” says Brian Bethune, chief U.S. financial economist-IHS Global Insight of the GMAC deal. “We’ll see increased credit availability. It won’t be instant pudding, as in tomorrow. But by the end of January, we should begin to see more automotive loans.”

The Treasury investment gives both GMAC and GM breathing room, according to analysts who feared the finance firm would be forced to declare bankruptcy if it were unable to secure financial assistance from the government. The financial-aid package reduces the specter of a GM bankruptcy, as well.

A note released by financial-services firm, JP Morgan, says Treasury’s actions signal the government is taking a “comprehensive approach to the overall GM-complex.” While a GM Chapter 11 filing cannot be entirely dismissed, says JP Morgan, a Chapter 7 liquidation of GM “seems highly unlikely.”

GMAC’s troubles also threatened GM dealers, who rely on the firm to finance vehicle inventory they buy from the auto maker to sell to consumers. Several analysts believed GMAC would have been forced to pull its vehicle financing from all of its dealers — as many as 40% of GM dealers finance with GMAC — if the company had been unable to obtain the financial-aid package.

GMAC’s policies regarding dealer floor-plan financing remain unchanged, says Sue Mallino, GMAC spokeswoman. “We tried very hard to protect our financing of dealers’ inventory,” she says. “We recognize it is critical.”

The infusion of Treasury money means GMAC will have greater flexibility in the future, JP Morgan says. As a result of its bank status, the firm also will have greater independence from GM and may be able to gain share from other auto maker captive-finance companies.

As part of the government package, GM will reduce its stake in GMAC to less than 10%. The auto maker will transfer its remaining equity interest to an independent government-approved trustee, who will dispose of the equity within three years.

Cerberus also must reduce its equity stake in GMAC, to no more than 33% and its voting control to less than 15%. Additionally, Cerberus must cut all ties between its management team and GMAC.

The problem for GM is that it’s left without a captive finance firm, which may be a disadvantage, some analysts say. However, if GM is successful in selling vehicles without a captive finance are, other auto makers may follow suit, JP Morgan says.

The money for GMAC will come from a specific program created within the Troubled Asset Relief Program (TARP), which was designed to provide financial assistance to the auto industry.

The financial package follows the Federal Reserve Board of Governors approval on Dec. 24 of GMAC’s application to become a bank-holding company, a move that makes the finance firm eligible to obtain future TARP funds.

As a federally chartered bank, GMAC will have access to emergency, short-term loans provided by the federal government and its debt guaranteed by the Federal Deposit Insurance Corp.

GMAC’s bank application, although approved, was contingent on being able to raise $30 billion through a debt-equity swap with its bondholders by Dec. 26. Only 58% of the bondholders had agreed to the swap in the hours leading up to the deadline, which GMAC extended four times.

Although GMAC is not saying whether it reached its desired 75% goal, bondholder support apparently was enough for the government.

cbanks@wardsauto.com