GM to Acquire AmeriCredit

General Motors announced on Thursday (July 22) that it would acquire AmeriCredit for $3.5 billion (details at http://online.wsj.com/article/SB10001424052748703467304575382810481110230.html).

GM hasn’t had its own lending arm since 2006 when it sold GMAC. Recall that GMAC pushed 72-month car loans to nonprime buyers and questionable mortgages before it got a $17 billion government bailout in 2008. It’s easier to sell cars when you can finance buyers whose credit makes it difficult to buy elsewhere, and GM knows this. But what happens when these buyers are underwater (the car is worth less than the balance of the loan) and can no longer make their payments?

I thought GM was going to reinvent itself by building better cars, not by trying to increase sales to people who can’t afford the payments. I thought the banks and credit card companies were evil by engaging in “predatory” practices that encouraged customers to incur high-interest debt they didn’t need. And I thought GM was going to use taxpayer money to stabilize the firm, not buy other companies. It’s worth noting that the U.S. Treasury owns 61% of GM but denies any involvement in the decision to acquire Americredit.

The bottom line is that GM is using taxpayer money to buy the country’s largest provider of car loans to consumers with bad credit. The big issue here is RISK EXPOSURE. GM sees an opportunity for financial gain, but will not shoulder all of the additional risk associated with the deal. We all know who will end up paying (again) if AmeriCredit experiences the same fate as GMAC. President Obama told us the other day that the era of bailouts is over. Somehow I’m just not convinced.

3 thoughts on “GM to Acquire AmeriCredit

  1. I want to know why the treasury dept is doing nothing about this. They micromanage GM’s executive pay but seem ok with the company exposing itself to more risk.

  2. great job parnell, you were out in front on this one, heard you on wilkow and then beck and hannity covered it

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