GM’s bid to ac­quire sub­prime lender riles law­mak­ers

Austin American-Statesman - - BUSINESS - By David Welch

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.

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