GM’s bid to acquire subprime lender riles lawmakers
SOUTHFIELD, Mich. — General Motors, the automaker 61 percent owned by the U.S. Treasury, is facing criticism from lawmakers over its decision to pay $3.5 billion to buy a lender that specializes in auto loans to shoppers with less than top-notch credit.
Although GM said it is planning to use its new lending arm, Fort Worthbased AmeriCredit Corp., to write auto leases and provide a “modest” boost in subprime loans, Sen. Chuck Grassley, R-Iowa, asked the watchdog of the government’s bank-rescue program to investigate the purchase. And a member of a think tank questioned the wisdom of a company that is majority-owned by the government lending money to people with poor credit after a financial crisis was sparked by risky loans.
“If GM has $3.5 billion in cash to buy a financial institution, it seems like it should have paid back taxpayers first,” Grassley said in a statement on his website. “After GM’s experience with GMAC, which left GM seeking a taxpayer bailout, you have to think the company and, in turn, the taxpayers would be better off if GM focused on making cars that people want to buy and stayed clear of repeating its effort to make high-risk car loans.”
On Thursday, GM and AmeriCredit announced the deal, which is intended to help the automaker sell to more customers with damaged credit ratings or who want to lease a new vehicle.
AmeriCredit is also profitable, having made money in nine of the past 10 years, a total of $1.8 billion. The purchase will be made with some of the $30 billion in cash GM has on hand, said Chief Financial Officer Chris Liddell, who called the deal a “building block” toward an initial public offering.