GM to pay $3.5 billion for auto financing company
AP Auto Writer
DETROIT – General Motors Co. will buy AmeriCredit Corp. for $3.5 billion, a deal that allows the automaker to expand loans to customers with poor credit and offer more leases, key areas where GM must grow to accelerate its car sales.
But the acquisition of the independent auto financing company also means that GM, which is 61 percent owned by the U.S. government, is getting back into the business of making risky loans. GM said it advised the U.S. Treasury Department of the acquisition, although government approval was not required.
GM executives have said for months that they were missing sales opportunities due to lack of credit for lease deals and financing for subprime buyers, those with credit scores below 620 on a 300-to-850-point scale. About 40 percent of U.S. customers have below prime credit scores, said Chris Liddell, GM’s chief financial officer.
“Clearly there’s an opportunity to bring more people into our showrooms and help them with finance,” he said after the deal was announced on Thursday.
Customers should now expect more lease deals from GM, which gets just 7 percent of its sales from leases, compared with 21 percent for the industry, he said. Only 4 percent of GM’s sales come from subprime buyers, which the company hopes to expand with the acquisition. Liddell said even a modest increase in subprime buyers from 4 percent to 5 percent would be significant. GM sold just over 1 million vehicles in the U.S. during the first half of the year.
The deal allows AmeriCredit to expand into more GM dealerships, while continuing to offer financing to the more than 11,000 dealerships it has relationships with across the U.S.