Friday, July 23, 2010

General Motors is back on the road to failure

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From Bloomberg

General Motors Co., the automaker 61 percent owned by the U.S., is buying subprime lender AmeriCredit Corp. for $3.5 billion to help it reach more customers with leases and loans to borrowers with faulty credit records.
The price of $24.50 a share is 24 percent more than Fort Worth, Texas-based AmeriCredit’s closing price yesterday of $19.70 a share in New York Stock Exchange composite trading. AmeriCredit rose to $24.04 at 9:56 a.m.
“This helps GM finance less-than-perfect-credit buyers and God knows there’s plenty of them today with economic conditions as they are,” said Joe Phillippi, principal of AutoTrends, a consulting firm in Short Hills, New Jersey. “A lot of people in the vast heartland of this country don’t have particularly great credit histories and that region has been the core of GM’s strength.”
GM had considered buying back its former lending arm, GMAC LLC, starting a bank or working with outside lenders to offer customers more financing options, three people with knowledge of the discussions said this month. Buying GMAC, now called Ally Financial Inc., or starting an in-house banking unit proved too difficult at that point, they said.
Chief Executive Officer Ed Whitacre had wanted to buy or start a lending arm before a fourth-quarter initial public offering, people familiar with the matter said in May. The automaker had decided a deal couldn’t be reached in that time frame, people with direct knowledge said earlier this month.

General Motors is back on the road to failure

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