Prior to its upcoming initial public offering, General Motors will again be involved in financing the vehicles it sells. The automaker announced today that -- pending stockholder approval -- it will purchase AmeriCredit, an automotive financing firm.
In recent plans to reenter the financing business, GM considered either buying back part of GMAC or starting its own arm from scratch, but its own finance arm would have needed to be ready before GM launches its IPO later this year.
The deal comes after GM sold off its stake in its former in-house financing organization, GMAC. With the $3.5 billion cash purchase of AmeriCredit, it will again participate in vehicle loans and leasing. The move will allow GM to offer a broader range of financing options to its customers, including sub-prime loan availability and expanded leasing.
"This acquisition supports our efforts to design, build and sell the world's best vehicles by expanding the financing options we can offer to consumers who want to buy GM vehicles," said Ed Whitare, GM chairman and chief executive officer. "Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings, and I am very pleased to have them on board."
The automaker reports that 4 percent of its sales come from sub-prime buyers, while the industry standard is closer to 7 percent. Since GM sold its controlling stake in GMAC, dealers have continued to complain about strict financing, costing them thousands in annual sales. Additionally, GM's lease rate is mere one third the rate of the industry average, tallying just 7 percent of its yearly sales.
"We're still working actively with other banks," GM CFO Chris Liddell told Automotive News. "This is not going to be the only solution. There are multiple ways of solving various financing solutions."
GM's purchase of AmeriCredit is not expected to change its projected goal of achieving a strong investment profile when its IPO is launched. AmeriCredit stockholders will be given $24.50 for each share they hold, (nearly 25 percent higher than its current market value).
Source: GM, Automotive News (Subscription required)