In­dus­try’s norms on fi­nanc­ing

Austin American-Statesman - - BUSINESS -

“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.”

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