Daily Archives: July 27, 2010

General Motors and AmeriCredit, Another Crisis in the Making?

by Pete the Banker

GM has announced it plans to buy AmeriCredit for $3.5 Billion. “General Motors said it will acquire auto financing company AmeriCredit so it can increase leasing and make more loans to buyers with low credit scores….GM CEO Ed Whitacre said Wednesday — the deal will make GM more competitive in auto financing. GM executives have said their sales have been hurt by a lack of subprime and lease financing.”
GM is the same company that basically repaid its loan to the Federal Government with TARP funds, but remains majority owned by the Government.  Remember the outrage when the Banks were receiving TARP money, but were buying other Banks instead of lending the funds?  Where is the outrage about this recently announced purchase by GM.? 
Proponents of the purchase suggest the at GM needs AmeriCredit in addition to its more conventional financing arm, GMAC, to enhance sales prospects and return to long term profitability.  The purchase is planned to help overcome perceived problems to  GM’s plans for an IPO, which as the July 19 -25, 2010 issue of Business Week include the following,
1) Consumer Reports in April rated GM of 15 Automobile Manufacturers, the second worst in reliability.
2) GM must convince former stock and bond holders to invest in its proposed IPO despite the unconventional bankruptcy to buy its shares at an IPO.  This is especially true since Obama branded investors who owned GM through bonds and conservative mutual funds, little old grandmothers and orphans, speculators.  (here)
3) GM still has a $27 Billion pension burden.
4) GM has not displayed a history of renewed profitability with its new Government blessed product line.
The Administration and CEO Ed Whitacre seem eager to make GM’s bailout a success irrespective of the strategy required.  Perhaps if they had originally followed traditional bankruptcy protocol, GM wouldn’t be relying upon failed pre financial crisis sales techniques in order to potentially attract new and former stockholders, bondholders, and financial institutions to their prospective IPO. 
Shouldn’t GM’s first  priority be to return to profitability and pay the taxpayer back, rather than pursuing a taking over a high rate lender in a nebulous attempt to float an  IPO? 
 
Tell ’em where you saw it. Http://www.victoriataft.com

General Motors and AmeriCredit, Another Crisis in the Making?

by Pete the Banker

GM has announced it plans to buy AmeriCredit for $3.5 Billion. “General Motors said it will acquire auto financing company AmeriCredit so it can increase leasing and make more loans to buyers with low credit scores….GM CEO Ed Whitacre said Wednesday — the deal will make GM more competitive in auto financing. GM executives have said their sales have been hurt by a lack of subprime and lease financing.”
GM is the same company that basically repaid its loan to the Federal Government with TARP funds, but remains majority owned by the Government.  Remember the outrage when the Banks were receiving TARP money, but were buying other Banks instead of lending the funds?  Where is the outrage about this recently announced purchase by GM.? 
Proponents of the purchase suggest the at GM needs AmeriCredit in addition to its more conventional financing arm, GMAC, to enhance sales prospects and return to long term profitability.  The purchase is planned to help overcome perceived problems to  GM’s plans for an IPO, which as the July 19 -25, 2010 issue of Business Week include the following,
1) Consumer Reports in April rated GM of 15 Automobile Manufacturers, the second worst in reliability.
2) GM must convince former stock and bond holders to invest in its proposed IPO despite the unconventional bankruptcy to buy its shares at an IPO.  This is especially true since Obama branded investors who owned GM through bonds and conservative mutual funds, little old grandmothers and orphans, speculators.  (here)
3) GM still has a $27 Billion pension burden.
4) GM has not displayed a history of renewed profitability with its new Government blessed product line.
The Administration and CEO Ed Whitacre seem eager to make GM’s bailout a success irrespective of the strategy required.  Perhaps if they had originally followed traditional bankruptcy protocol, GM wouldn’t be relying upon failed pre financial crisis sales techniques in order to potentially attract new and former stockholders, bondholders, and financial institutions to their prospective IPO. 
Shouldn’t GM’s first  priority be to return to profitability and pay the taxpayer back, rather than pursuing a taking over a high rate lender in a nebulous attempt to float an  IPO? 
 
Tell ’em where you saw it. Http://www.victoriataft.com