NEW YORK -- The slump in General Motors Corp.'s auto business may be its biggest problem, but it certainly isn't the only thing the world's largest carmaker must contend with these days.

Also on its list of woes: rising interest rates that are boosting borrowing costs for GM. That could put a big dent in the profits of its money-making financing unit, which has compensated for losses in other parts of GM's business.

This isn't something unique to GM. With interest rates on the upswing, it's a risk for many other companies -- including manufacturers, service providers and retailers -- that have come to rely on the profits from their financing operations.

All this has happened because Federal Reserve policymakers shifted into a tightening mode for short-term interest rates. Their target for the federal funds rate -- the rates banks charge each other on overnight loans -- now stands at 2.75 percent after seven quarter-point increases since June. As the federal funds rate rises, interest rates in the marketplace typically also increase.

It's no surprise that this Fed policy change will put pressure on profits at banks, mortgage and credit-card companies that are in the primary business of lending money. And it is especially true right now as short-term rates rise faster than long-term rates and the spread narrows between what they pay to borrow money and what they get back in interest payments from loan customers.

But those purely financial companies won't be the only ones affected by higher rates. Many nonfinance companies have built up their finance operations in recent years, something that has been a boon to earnings.

Nothing illustrates this more than what is going on at GM. Last month, GM abandoned projections of a break-even or even slightly profitable first quarter and slashed its full-year earnings outlook by more than half due to weak sales in its North American car business and rising health care costs.

The only bright spot in GM's portfolio has been its General Motors Acceptance Corp., its financing unit that is expected to turn in profits this year of around $2.7 billion, according to Prudential Equity Group.

But those profits are quickly coming under pressure because of higher interest rates. GMAC said its earnings dropped to $611 million in the fourth quarter of last year, down from record earnings of $630 million in the same period of 2003. Still, GMAC's profits accounted for about 97 percent of GM's profits in the fourth quarter of 2004.

For instance, when rates rise, GMAC has to pay more to borrow money so that it can finance leases and purchases of its cars. But consumers who have bought cars in recent years will be paying lower interest rates until they turn in or sell their vehicles. As a result, profits get squeezed. GM's mortgage business also faces a narrowing of interest-rate spreads in recent months.

"Highly profitable finance companies become less profitable until loans start to turn over," said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. "This is not the best part of the business cycle for financing companies."

Another company with a large financing arm is H&R Block Inc. While it derives more than half of its revenues from its tax-preparation business, the biggest driver of its earnings is its mortgage operations -- a business that it entered in 1997 when it bought Option One Mortgage Corp.

Already there is evidence of decline in the mortgage division's profits. In the third quarter that ended Jan. 31, earnings in that unit fell 27 percent, and for the first nine months of its fiscal year, profits fell 38 percent.

Other companies that have become increasingly reliant on their finance operations include heavy equipment maker Caterpillar Inc., retailer Target Corp. and industrial conglomerate General Electric Co.

Now that the era of cheap money is winding down and there is excessive leverage throughout corporate America, how this shakes out could lead to some turbulence in all financial markets.

In the case of GM, for instance, should there be a significant slowdown in its financing operation's earnings, it would put GM's creditworthiness in greater jeopardy. The company had $301 billion in consolidated debt at the end of last year, according to Standard & Poor's which is considering lowering its rating on some of GM's debt down one level to speculative, or junk, status.