GM Purchases Sub-Prime Lender..... to Boost Sales Before IPO

[amborin]

For G.M., a Subprime Solution


All this shilling has a subtext: General Motors is planning to file documents soon with the Securities and Exchange Commission to pursue an initial public offering this year. It has hardly been a secret, with Mr. Whitacre’s mentioning the prospect of an I.P.O. at nearly every turn.

That helps explain the timing of General Motors’ biggest deal since it emerged from bankruptcy in July 2009. Two weeks ago, the company agreed to buy AmeriCredit, a subprime lender, for $3.5 billion. At the time, industry insiders whispered, not so quietly, that it was meant to dress up G.M.’s sales numbers before an I.P.O.

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In other words — and take a moment to think about what this means — G.M. plans to prod sales of its vehicles by using AmeriCredit
to extend loans and leases to automobile customers with questionable credit. (That’s why they are called subprime loans.) These are the same customers who could very well be denied a loan by other lenders. But prudent lending is not at the top of G.M.’s to-do list: it needs to move its vehicles off the lot and it needs to do so quickly.

As Mr. Whitacre bluntly put it, “When you own somebody, you can tell them what to do.”

When General Motors last owned a financing arm, GMAC Financial Services, it was its mortgage business, Residential Capital or ResCap, that got into trouble, not its auto loans. In 2007, G.M. sold off 51 percent of GMAC, which ultimately required a $17.2 billion bailout as the housing market imploded.


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http://www.nytimes.com/2010/08/10/business/10sorkin.html?_r=1&ref=business

So here we go again, three years later, and G.M. is buying a subprime company to finance cars for people who may not be able to afford them, and given high unemployment levels, may not even have jobs to start saving for one. And yes, we, the taxpayers, still own 61 percent of the automaker.

[DainBramaged]

1. (sigh) The percentage of people with credit scores over 700 is LESS than 10% of the population

And that was QUOTED to me by the regional VP of Bank of America. Now since the other 90% of Americans who are able to get a loan are between 610 and 699 credit scores, and at this EXACT time and date are considered 'sub-prime' according to the current standard, what's wrong with that??????????

Those BELOW 600 ain't getting bought, period.