GM Financial to Offer Dealer Financing by April 2012
GM Financial will become a player in the commercial lending segment by the end of the first quarter 2012, according to statements made yesterday by the company’s president and CEO, Dan Berce.
FORT WORTH, Texas — GM Financial will become a player in the commercial lending segment by the end of the first quarter 2012, according to statements made yesterday by the company’s president and CEO, Dan Berce. The successful launch of a new program would mark the next phase in the company’s transformation from an independent subprime finance source into a full-scale captive finance company.
Berce made the announcement at the 2011 Leveraged Finance Conference, hosted by Deutsche Bank Securities Inc. He said the company will roll out its full-service inventory financing platform by April 1, 2012. He added that the company has recently hired a number of experienced executives and staff from other captive companies to steer the new business segment.
“The goal here is not to supplant Ally. It’s having a platform that’s going to give dealers optionality and a choice,” he said. “Ally served the market well for GM, but they have 80 percent of GM’s dealer business — that’s a situation GM was uncomfortable with from a concentration standpoint.”
Although short on details, Berce said GM Financial would offer inventory financing, real-estate loans for store upgrades and capital loans.
The executive also offered an update on the company’s evolution into a captive finance company, saying that both companies have benefited since GM acquired GM Financial, formerly AmeriCredit Corp., last October for $3.5 billion. Berce, who also served as AmeriCredit’s chief executive, said the finance company’s balance sheet is strong, noting that net income for the June quarter increased from $86 million a year ago to $96 million.
Before the acquisition, Berce said the company originated $127 million of GM’s new-vehicle loans. In the June 2011 quarter, that number increased to $578 million. Berce added that the company is committed to maintaining and growing its non-GM business, which has increased in volume from about $600 million to $700 million since the acquisition.
“This speaks to the fact that subprime auto lending is relatively underserved in the market,” Berce noted.
The acquisition also has allowed General Motors to further penetrate the subprime market. GM’s market share in that demographic has increased from 4.9 percent to 6.8 percent since the acquisition. Berce added that GM Financial now accounts for 18 percent of GM’s subprime and lease activity. The captive also increased its percentage of originations for new GM vehicles from 14 to 38 percent.
As for leasing, which GM Financial rolled out nationally in July, the company’s percentage of industry sales has risen from 6.5 percent to 13.3 percent.
“The fact we got our [leasing] platform up and running created a competitive environment and really caused Ally to step up and be more competitive,” Berce said.
Berce also noted that GM Financial’s expansion of its leasing program into Canada — which followed the captive financing company’s purchase of FinanciaLinx Corp., one of Canada’s largest independent leasing companies, in March — has allowed GM to triple its lease penetration there. Berce said the company will look to build on that in 2012.
During the GM Financial’s performance update last month, the company reportedly originated $1.1 billion in auto loans in the United States, up from $935 million the previous quarter and $624 million in the year-ago period. Lease originations accounted for $311 million, compared to $11 million in the previous period.
As for the relationship between GM Financial and GM, Berce described it as an arms-length arrangement. “I can tell you, in the course of a year, we have not had one request or suggestion to buy deeper or charge less,” he said. “If GM wants us to charge less, they have to pay us through subvention dollars like they would any third party.”
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