* GM to buy AmeriCredit, restart captive finance arm
* $3.5 bln deal will pay $24.50 per share
* AmeriCredit shares close 21 pct higher
* Analysts say deal positive step toward GM IPO
(Edits throughout, adds analyst comment, closing stock price)
By Kevin Krolicki and David Bailey
DETROIT, July 22 General Motors Co [GM.UL]
plans to buy auto finance company AmeriCredit Corp ACF.N for
$3.5 billion in a cash deal financed by government bailout
money and aimed at removing a major investor concern before a
The deal announced Thursday would give GM an in-house
lending arm for the first time since it sold a controlling
stake in GMAC in 2006 and a chance to compete with
faster-growing rivals led by Ford Motor Co (F.N), by offering
riskier forms of financing including subprime loans and
The move also represents an admission that the go-it-alone
strategy of past GM management had failed and a bet that the
government-owned automaker can improve returns for taxpayers by
drawing down part of the cash cushion left from its bailout.
Many GM dealers have complained that lack of financing
options for consumers has cost them sales in a U.S. auto market
stuck in a slow grinding recovery.
Analysts said the AmeriCredit deal addresses a risk to GM's
sales momentum as it prepares for a stock offering this year
that is intended to lower the government's nearly 61 percent
But by bringing financing back in-house, GM is also taking
on risk by stepping back into an area that forced the automaker
to take massive charges as recently as 2008.
"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," said Autoconomy.com analyst
Mike Jackson, chief executive of the No. 1 U.S. auto
dealership group AutoNation (AN.N), said the AmeriCredit deal
shows that GM is executing on its turnaround plan.
"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
GM plans to pay AmeriCredit stockholders $24.50 per share.
AmeriCredit closed up 21 percent at $23.91 on Thursday.
'CORE' OF A NEW FINANCE ARM
AmeriCredit, which has $9 billion in auto loans, would
become the "core" of a new GM finance arm.
Other major automakers, including Ford Motor Co (F.N) and
Toyota Motor Corp (7203.T), have in-house financing arms they
use to provide loans to dealers and car buyers, often at
subsidized rates to help sell vehicles.
GM's move leaves Chrysler, controlled by Fiat SpAFIA.MI,
as the only large automaker without a dedicated financing arm.
GM Chief Executive Ed Whitacre said the automaker
recognized it could not compete without owning its own lending
arm. That reverses a stance that dates to 2006 when it was
scrambling to raise cash under former CEO Rick Wagoner and sold
control of GMAC.
"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 ended the first quarter with $36 billion in cash and
securities. It will pay for AmeriCredit from that cash, funding
left over from the Obama administration's $50 billion bailout.
U.S. officials have said they would not interfere with
decisions by GM. A spokesman for the U.S. Treasury said the
department had been notified in advance of the deal but played
no role in it.
GM management moved to close the AmeriCredit deal quickly
when it was presented, Whitacre said. GM expects the deal to
close in the fourth quarter.
An earlier plan GM officials had considered would have seen
the automaker take back the auto financing operations of GMAC,
essentially combining parts of two government-owned firms.
Detroit-based GMAC, now known as Ally Financial GKM.N, is
56-percent owned by the U.S. Treasury after the government
injected $17 billion as part of a restructuring that also saw
the finance company become a commercial bank.
'BUILDING BLOCK' TO IPO
GM Chief Financial Officer Chris Liddell said the deal
would help GM repay its taxpayer investment by providing a
"building block" toward a more successful IPO.
With Fort Worth, Texas-based AmeriCredit operating as part
of GM, the automaker expects to offer more loans to subprime
buyers and to sell more vehicles on lease.
GM's sales to subprime customers could rise to 5 percent or
6 percent of sales from 4 percent now, Liddell said.
GM's lease rates as a share of sales will also rise from 7
percent closer to the 21 percent that the rest of the industry
averages, he said.
The goal is to lift GM's U.S. sales which trailed the
industry in the first half. GM had 14 percent growth while U.S.
sales jumped 17 percent.
Jesse Toprak, an analyst with market tracking firm TrueCar,
estimates that about 25 million U.S. car shoppers have been
pushed into the subprime credit category because of
difficulties in restructuring their mortgages.
Most of those consumers could afford monthly auto payments
if they could find financing at dealerships and those loans
would be less risky than simple credit scores would suggest.
"I think this is a smart move by GM and if they get this
right, they can see sales rise significantly," said Toprak.
A subprime borrower is generally defined as a customer with
a credit score below 620. Such borrowers can account for up to
25 percent of car shoppers in some markets, dealers say.
(Reporting by Kevin Krolicki and David Bailey in Detroit,
David Lawder in Washington; Editing by Robert MacMillan, Leslie
Gevirtz and Tim Dobbyn)