GM turns to subprime

[CHIMO]

General Motors Co.'s decision to buy AmeriCredit Corp. (ACF-N24.014.3121.88%) is getting some traction among observers on Thursday. No, it's not the price tag of the deal, at $3.5-billion (U.S.). Nor is it the perplexing move by GM to expand into auto financing so soon after selling its GMAC financial division in 2006.

Rather, it's because the deal will give GM the ability to give subprime loans to prospective car buyers. Yes, subprime: the dirty word that got the U.S. economy into big trouble earlier this decade, at least in its application to the real estate sector.

Here's GM's chief financial officer explaining the move (via, Stocks To Watch Today):

"Despite the fact that non-prime people in North America represent about 40 per cent of the population, they represent a very small segment of new car purchases, only around 4 per cent of the sales that we make are to non-prime customers and financed. So we clearly think there’s an opportunity through targeted marketing and working through AmeriCredit to increase that number."
http://www.theglobeandmail.com/globe-investor/markets/markets-blog/gm-turns-to-subprime/article1648495/?cmpid=rss1

[Oregone]

1. Who said American Auto Companies aren't innovative?

:)

[jtuck004]

2. And the good part just reported on CNBC, since GMC has only

paid back $6.7 billion of the $52 billion they were loaned by the government, this is in effect
taxpayer money funding this buying opportunity to engage in subprime loans...