Industry’s norms on financing
“When we bailed out GM, what were we bailing out?” Berlau asked. “The rationale behind the financial regulatory bill that just passed was that subprime lending was bad, but the government’s in the subprime business.”
The nonpartisan Congressional Budget Office estimates the GM bailout will end up costing taxpayers about $30 billion, Grassley said.
“Because taxpayers still have a large stake in GM, I ask that you conduct an inquiry into the level of due diligence and analysis that went into GM’s acquisition,” Grassley, the senior Republican on the Finance Committee, said in a letter to Neil Barofsky, special inspector general of the Troubled Asset Relief Program.
Ed Whitacre Jr., GM’s chairman and chief executive, has been seeking to get the automaker into auto retail financing since May, said people familiar with the company’s plans. Dealers have told GM they were losing sales for lack of financing options, and the automaker said it sells 7 percent of its cars with leases, compared with 21 percent for the rest of the industry.
GM may increase sales financed with nonprime loans, Liddell said. The company makes 4 percent of sales to consumers in that credit grade, the same percentage as the rest of the industry, GM said. It will continue to work with other lenders, and AmeriCredit will provide a “single-digit” percentage of GM’s financing, Liddell said.
“When you look at the population, about 40 percent falls into nonprime,” he said. “We think it will help. Four percent of our sales are to non-prime customers. If you just hit a modest increase from 4 to 5 percent, it’s a significant number.”
The acquisition should help dealers, said Mike Jackson, CEO of AutoNation Inc., the nation’s top retailer of GM vehicles. “This will help GM improve their sales 10 to 15 percent,” he said in an e-mail. “We see this as a boost to our GM business.”