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AmeriCredit to Focus on Subprime

August 11, 2008

FORT WORTH, Texas — Full-spectrum automotive lender AmeriCredit has announced plans to focus on subprime originations for the remainder of 2008 and beyond. The company will suspend prime originations and cut back on nearprime loans to focus on the core market on which it was built.

"Our decision to limit prime and nearprime credit offerings was based on our inability to generate adequate profitability from these products given the higher funding costs and capital requirements of the current environment," said Dan Berce, AmeriCredit's president and CEO. "With our constrained volume objectives, we are focusing on originating those loans that provide the highest possible returns."

Additionally, the lender will no longer finance loans in Canada and has officially discontinued its leasing and direct-lending platforms.

The changes are part of the company's ongoing strategy of reducing loan volume across the board. AmeriCredit's annualized net credit losses were 5.9 percent for the quarter beginning in June compared to 3.3 percent a year ago. Year-over-year, 31- to 60-day delinquencies saw an increase of 1.3 percent, while delinquencies over 60 days were up 0.8 percent over the same span. The company's rate of recovery on repossessed vehicles was stable over the past two quarters: 43.6 percent in the June quarter compared to 43.9 percent in the March quarter.

The lender has been forced to implement stricter guidelines and higher loan pricing as consumer demand has continued to decrease. "Consumer demand for new- and used-vehicle purchases has softened considerably over the past several months," Berce said. "This softening demand, combined with the pullback by most of our major competitors, has allowed us to maintain a strong market presence with auto dealers even as we have decreased our originations volume by two-thirds from last year."

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