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GM Financial Profit Rises 22 Percent on Loans, Leases For Carmaker

May 4, 2011
2 min to read


General Motors Co.'s finance unit said first-quarter profit rose 22 percent as the volume of loans it originated surged from a year earlier.


Net income climbed to $77.2 million from $63.2 million a year earlier, Fort Worth, Texas-based General Motors Financial Co. said today in a statement, reported The Detroit News.

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GM Financial's loan originations climbed 82 percent from a year earlier to $1.14 billion in the quarter. The company started $310.9 million in leases in the quarter as it expanded such programs for GM, the largest U.S. automaker.


GM acquired the lender, formerly known as AmeriCredit Corp., last year before Chief Executive Officer Dan Akerson led the automaker through an initial public offering. More than $23 billion of common and preferred shares were sold in the IPO that reduced the U.S. and Canadian governments' stakes in Detroit-based GM.


Leases accounted for 16 percent of GM's U.S. sales through March, trailing the industry average of 22 percent, Don Johnson, vice president of U.S. sales, said on an April 1 conference call. Leases were 5 percent of GM's sales in March 2010, he said.


GM Financial offered leases in 30 U.S. states at the end of April, up from 21 at the end of March, Tom Henderson, a spokesman, said today in a telephone interview. The lender will offer leasing across the country by mid-year, Johnson has said.


Sales to subprime buyers in April accounted for about 7 percent of GM's deliveries, compared with 5.5 percent for the industry, Johnson said yesterday on a conference call.

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GM will begin to establish wholesale financing at GM Financial "over time," Chief Financial Officer Daniel Ammann said at an investor conference last month. Wholesale lending involves financing dealers' inventory.


"We expect GM Financial to be active in subprime, active in lease, active in wholesale over time," Ammann said April 20. The market for buyers with prime credit is "well served" by other lenders, and GM doesn't see a need to underwrite loans in that market, he said.


GM Financial competes with Ally Financial Inc., which was formerly the automaker's GMAC Inc. finance arm. Ally handled 38 percent of retail lending to GM buyers last year, the lender said in February.


GM Financial will "bring competition to the market" and help the automaker continue to offer leases when other lenders pull back, Ammann said.


"If leasing goes away, we know that we can continue to do it," he said. "But having said all of that, we also want the third parties, of which Ally is the largest and most significant, to do a majority of our financing for us. We don't want to run a $100 billion balance sheet."

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