By Kevin Krolicki and David Bailey
DETROIT (Reuters) - General Motors Co
The deal, which remains subject to approval by AmeriCredit shareholders, would give GM an in-house lending arm for the first time since it sold a controlling stake in GMAC in 2006.
GM dealers have complained that tighter financing terms have cost them sales in a U.S. auto market that has failed to deliver the solid recovery many were anticipating in 2010.
GM, which the U.S. government restructured in bankruptcy, is preparing for an initial public offering later this year, people familiar with those discussions have said.
The deal removes an uncertainty as GM prepares for a stock offering to lower the government's nearly 61 percent stake.
"It was a step that was necessary in order to do the IPO," Autoconomy.com analyst Erich Merkle said. "It is going to be much more beneficial for GM to have a captive finance arm when they go to do their IPO. Without it, it puts them at a disadvantage."
Mike Jackson, chief executive of the No. 1 U.S. auto dealership group AutoNation
"I have said it to anyone and everyone who would listen," Jackson told Reuters. "I wouldn't run an auto manufacturer without a captive finance company. I think it's that strategically crucial."
GM plans to pay AmeriCredit stockholders $24.50 per share. AmeriCredit's shares rose 22 percent to $24.07 on Thursday.
'CORE' OF A NEW FINANCE ARM
GM understood it could not compete without owning its own lending arm, said Chief Executive Ed Whitacre. That reverses a stance that dates to 2006 when the automaker was scrambling to raise cash to restructure outside bankruptcy.
"We were not as competitive as we could be, and it hurt our ability to meet rising demand for GM cars and trucks," Whitacre said. "Now we are going to fix that."
GM management acted quickly to close the AmeriCredit deal when it was presented, Whitacre said. As late as June, GM representatives had been talking to JPMorgan Chase
"It came together very quickly," GM Chief Financial Officer Chris Liddell said of the deal.
Whitacre said GM would continue its relationship with Ally Financial
GM said AmeriCredit, which has $9 billion in auto loans on its balance sheet, would become the "core" of a new captive finance arm. The automaker said it did not expect the deal to hurt its balance sheet and had not altered its goal of returning to an investment-grade credit rating.
GM ended the first quarter with $36 billion in cash and marketable securities. It will pay for AmeriCredit with that cash, funding left over from the Obama administration's $50 billion bailout in 2009.
GM said the management team of Fort Worth, Texas-based AmeriCredit would stay after the acquisition. AmeriCredit has financing agreements in place with about 4,000 GM dealers.
AmeriCredit would increase financing for subprime borrowers and allow it to sell more vehicles on lease, GM said.
Dealers have complained that GM's lack of lease financing has cost sales of higher-margin vehicles in its Cadillac line while tighter financing for less credit-worthy customers has made it harder for Chevrolet brand shoppers to close a deal.
Through June, about 4 percent of GM's retail sales were to "nonprime" buyers who arranged financing, the automaker said. A subprime borrower is generally defined as a customer with a credit score below 620.
At the same time, GM leased only 7 percent of the vehicles it sold in the first half of 2010. The industry average was closer to 21 percent.
Buying AmeriCredit could allow GM's sales to subprime customers to rise to 5 percent or 6 percent of sales, Liddell said. Lease rates will also rise, he said. "At the margin, a percent here and a percent there will make a big difference for our sales," he said.
GM's U.S. sales rose 14 percent in the first half of 2010 from a year ago, beneath industry growth of almost 17 percent.
The automaker will announce second-quarter results in August. A filing with securities regulators for its IPO could also come as soon as next month, sources have said. The AmeriCredit deal is expected to close in the fourth quarter.
(Editing by Gerald E. McCormick and Maureen Bavdek)
