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Posted: 7/23/2010 3:35:06 AM EDT

DETROIT (AP) - General Motors Co. will buy AmeriCredit Corp. for
$3.5 billion, a deal that allows the automaker to expand loans to
customers with poor credit and offer more leases
, key areas where GM
must grow to accelerate its car sales.

But the acquisition,
announced Thursday, also means that GM, which is 61 percent owned by
the U.S. government, is getting back into the business of making risky
. AmeriCredit is an independent auto financing company that
already works with about 4,000 GM dealers.

GM executives have
said for months that they were missing sales opportunities due to lack
of credit for lease deals and financing for subprime buyers, those with
credit scores below 620 on a 300-to-850-point scale. About 40 percent
of U.S. customers have below prime credit scores, said Chris Liddell,
GM's chief financial officer.

"Clearly there's an opportunity to bring more people into our showrooms and help them with finance," he said.

said that customers could now expect more lease deals from GM. Only 7
percent of its sales are from leases, compared with 21 percent for the
industry, he said. Only 4 percent of GM's sales come from subprime
buyers, which the company hopes to expand with its AmeriCredit

"If you just had a modest increase from 4 to 5 percent, that's a significant number in its own right," Liddell told reporters.

GM sold just over 1 million vehicles in the U.S. during the first half of the year.

Detroit automaker will pay $3.5 billion in cash to buy all of the Ft.
Worth, Texas-based AmeriCredit's shares at a price of $24.50 each — a
24 percent premium over Wednesday's close.

The deal allows the
auto financing company to expand into more GM dealers, while continuing
to offer financing to the more than 11,000 dealers it already has
relationships with.

GM has had a financial relationship with
AmeriCredit for years, and it was formalized in September of 2009.
AmeriCredit now gets about one-third of its business from financing new
and used GM vehicles, GM said.

AmeriCredit, which was founded in 1992, has about 800,000 customers and $9 billion worth of auto loans on its books.

expects the deal to close in the fourth quarter. It said it advised the
U.S. Treasury Department of the acquisition but government approval was
not required.

The automaker says that its partner Ally Financial
— formerly known as GMAC Financial Services Inc. — will continue to
finance GM's dealer inventory and make loans to buyers with good credit.

says it is not considering a purchase of Ally's auto financing unit. GM
sold controlling interest in GMAC in 2006. The company eventually had
to be bailed out by the U.S. government because of problems with its
home mortgage loan unit.

Liddell said the acquisition is a
helpful, but not essential for GM's planned public stock offering. The
company plans to sell stock to the public, perhaps in the fourth
quarter. The sale would help the government get rid of at least part of
its ownership stake in the company.

"I'll describe it as another useful building block in the foundation for the IPO," Liddell said.

Isn't loaning money to people who have shitty credit, and probably can't/won't pay it back, part of what got us in this mess in the first place?

Link Posted: 7/23/2010 3:38:37 AM EDT
Wow! I wonder who picks up the tab when these people default

Link Posted: 7/23/2010 3:39:45 AM EDT
What could possibly go wrong?
Link Posted: 7/23/2010 3:41:47 AM EDT
Isn't loaning money to people who have shitty credit, and probably can't/won't pay it back, part of what got us in this mess in the first place?

Yes, but those loans were insured by GSEs.
Link Posted: 7/23/2010 3:43:43 AM EDT
Isn't there a thread about this already
Link Posted: 7/23/2010 3:45:03 AM EDT
Can I use the loan to buy a Toyota,or do I have to buy a GM product ?
Link Posted: 7/23/2010 3:45:18 AM EDT
Could be another thread. I didn't search and I only waded a few pages deep.

ETA: here it is


This one can be locked

Link Posted: 7/23/2010 3:46:15 AM EDT
Isn't loaning money to people who have shitty credit, and probably can't/won't pay it back, part of what got us in this mess in the first place?

How about the few who got anally raped in a divorce and got stuck with her bills she ran up during.
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