General Motors Financial Company brings motors to the general public. Formerly AmeriCredit and now operating as GM Financial, the company is the in-house auto financing arm of General Motors. It works with GM dealers around the US and in Canada to offer new- and used-vehicle financing services. Founded in 1992, the former AmeriCredit traditionally provided credit to customers with less-than-ideal credit histories. Today, GM Financial owns a portfolio of some $12 billion in finance receivables and leased vehicles. The company operates about 20 credit and customer service centers ithroughout the US. General Motors acquired AmeriCredit for some $3.5 billion in 2010 in an effort to boost auto sales.
By acquiring the lender, GM once again owns an in-house finance arm -- which it hadn't since it sold control of the former GMAC in 2006. The transaction should help the automaker increase sales to underserved nonprime buyers and leasing customers. The company launched a regional lease program in 2011 that targets subprime buyers with lower credit scores.
The takeover by GM couldn't have come at a better time for AmeriCredit. Going into 2008, the company had plans for growth such as making more direct-to-consumer loans, adding leasing programs, and expanding in Canada. However, the credit markets took a nosedive, loan defaults increased, and the company revised its strategies. It raised its minimum credit score requirements for new loans, closed more than half of its credit centers, and eliminated about 1,000 staff positions. AmeriCredit also stopped issuing loans directly to customers, ceased to provide lease financing through its dealership network, and discontinued operations in Canada.
Following the acquisition by General Motors, GM Financial went about rebuilding its business. In addition to ramping up its subprime lending activity, the company bought auto leasing firm FinanciaLinx to re-enter the Canadian market. To continue its growth, it has made overtures about acquiring the international business of the successor to GM's former lending arm, Ally Financial. If the deal is consummated, it will expand GM Financial's operations in Europe and Latin America.
Despite making strides, the company's loan originations remain below pre-recession levels and revenues have decreased each of the past three fiscal years, from more than $2.5 billion in 2008 to just over $1.4 billion in 2011. Its bottom line has seen a inverse trend, however, increasing each of the last three years and topping more than $375 million in 2011, as loan quality improved and credit costs declined. – less