General Motors, in agreeing to acquire AmeriCredit Corp., has reshaped the auto finance landscape.
In this one move, GM solves its financing dilemma, freeing it from the whims of outside providers of financing and returning it to arguably its most profitable historical endeavor: vehicle finance.
Meanwhile, AmeriCredit jumps to the top of the auto finance heap with its marriage to GM. The venture gives it access to a deluge of applications, and offers a clean and profitable “capital event” for its senior management team and investors, both of which have been to the brink and back since the credit crisis began. This is a well-deserved reward for the ACF team. At the height of the credit crisis, there were obituaries prepared for the company. (Heck, we weren’t sure the company would make it at one point.) And now, the plumbest of plumb asssignments: captive finance arm for GM.
There were a host of auto finance companies pining for the GM captive business, including several major banks, who argued that their cost of funds would be lowest. Obviously, GM is betting that it can earn more from owning a captive than a finance partner can save it through more efficient funding. In fact, credit costs have remained sufficiently low so that even AmeriCredit has been able to originate at reasonable funding costs.
The silver lining for GMAC/Ally? That it executed its rebranding before the announcement and that it has had time to rebuild its business into something other than GM’s captive. Ally’s been originating at a torrid pace in recent months, and we believe GM-derived business is at least responsible for some of that. It remains to be seen just how much business Ally will lose to the new GM captive. GM officials in a call with analysts and media repeatedly stressed that the company would continue to work with Ally. We wonder whether that will hold true over the long term.
AmeriCredit, as GM’s captive, does face some challenges. It might be difficult for ACF to navigate the GM-captive push/pull. As a captive, it will be pressed to move the metal and forgo net interest margin, not a comfortable mindset for an enterprise that has been obsessively focused with profitability and earnings performance. Further, at the least, GM had a hand in GMAC’s implosion. While it is doubtful the new GM captive will venture as far from auto finance as did GMAC, there is the possibility of a certain imprudence that could dampen the end results for the new captive.
These are minor hurdles to AmeriCredit, a firm that has been steeled by the credit crisis. (We’ve had significant opportunity to work with AmeriCredit, which sits on Auto Finance News’s Auto Finance Council industry group.) Despite any potential political maelstrom as a result of buying a finance company –and a subprime lender, no less — while still on the government’s dole to the tune of a 61% stake in the company, GM has taken the bold step of returning to the finance arena. The company, and arguably the automotive industry, will be the better for it.
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Marcie you asked: “Is the litigation spigot opening? Should we expect a slew of similar cases as we head into 2010?”
I do not believe this is an example of that possibility. Instead it could just be a possible case of Attorney greed and then again maybe not.
Reference: “Matthew C. Klase, Esq. by e-mail at Contact(at)WebbLLC(dot)com or by calling (770) 444-9325. Webb, Klase & Lemond, LLC is a law firm that practices complex litigation with a focus on litigation arising from wrongful deprivations by corporate and government entities. The firm has handled numerous consumer class actions.”
Lawsuit claims that Louisiana-based Crescent Bank & Trust imposes greater fees, penalties, and interest upon its customers in conjunction with their automobile loans than is authorized by the loan agreements.
Atlanta, Ga. (PRWEB) December 30, 2009 — Atlanta-based law firm Webb, Klase & Lemond, LLC has filed a class action lawsuit against Crescent Bank & Trust (“Crescent”) alleging bad faith imposition of unauthorized interest, fees, and penalties on Crescent’s automobile loan customers. Crescent has developed relationships with numerous new and used car dealerships across the country whereby Crescent purchases vehicle loans directly from the dealerships. Crescent has focused its auto loan business on sub-prime customers who are often not able to obtain financing through traditional channels. The lawsuit alleges that Crescent routinely ignores the actual terms of its customer loan agreements – which are purchased from dozens of different car dealerships across several states – and instead imposes a one-size-fits-all billing and payment system. The suit contends that this practice results in customers paying higher fees, interest, and penalties than authorized by their loan agreements.
The Plaintiff has brought class action claims for breach of contract, conversion, trespass to personalty, and money had and received. The Plaintiff has also asserted an individual claim for violations of the Georgia Fair Business Practices Act. Based on these claims, the Plaintiff alleges that Crescent is liable for all damages that have resulted from the imposition of improper fees, interest, and penalties on car and truck loan customers.
The case, styled Joseph v. Crescent Bank & Trust, is pending in the Superior Court of Fulton County, Georgia and has been assigned case number 2009-CV-179274. Crescent has not yet answered the case and the discovery process has not yet begun. After a suitable period of discovery, Plaintiff intends to move for certification of the case as a class action on behalf of all similarly situated Crescent customers.
If you wish to discuss this action or have any questions concerning this press release, please contact Matthew C. Klase, Esq. by e-mail at Contact(at)WebbLLC(dot)com or by calling (770) 444-9325.
Ally provided AutoFinanceNews.net with the following statement:
The long term partnership between Ally and GM is strategically important to both organizations and will not change. GM reinforced that view on their call today.
We win business based on our relationship with dealers and being competitive, and as evidenced by our high market share, we do that extremely well.
As a bank holding company, our competitiveness is continually improving and is a fundamental source of our long-term competitive advantage. In addition, Ally has broad product offerings for dealers to meet several facets of their business.