Subprime loans to less than credit worthy customers make gm sales look good.

[powderman]

Because it Worked So Well in the Housing Market    Subprime auto loans? General Motors is rolling the dice by vastly increasing the number of loans to less than credit-worthy customers.

Investors Business Daily:

President Obama has touted General Motors (GM) as a successful example of his administration’s policies. Yet GM’s recovery is built, at least in part, on the increasing use of subprime loans.

The Obama administration in 2009 bailed out GM to the tune of $50 billion as it went into a managed bankruptcy.

Near the end of 2010, GM acquired a new captive lending arm, subprime specialist AmeriCredit. Renamed GM Financial, it has played a significant role in GM’s growth.

The automaker is relying increasingly on subprime loans, 10-Q financial reports shows.

Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.

Subprime Key Driver

GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012.

The worse the FICO score, the bigger the increase. From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion. The second worst category, 540-599, rose 28% from about $3.4 billion to $4.3 billion.

Prime loans, those above 660, dropped 42% to $676 million.
GM Financial provides just over 8% of GM’s financing. Prior to 2006, GM’s captive lending arm was GMAC, but GM sold a controlling stake in 2006. GMAC later renamed itself Ally Financial and continues to provide the bulk of GM’s financing.

At the peak of the credit crisis and recession in late 2008, Ally announced that it would move away from subprime lending.
By spring 2010 GM’s new management, led by North American executive Mark Reuss, wanted to move back into subprime, fearing that GM couldn’t compete.

Yes, GM has to sell product to survive and prosper but I would like to point out that we, the taxpayer, still own a considerable slice of the auto giant — 26% to be exact. If there is another downturn, a lot of those loans are going under with a subsequent hit to GM’s bottom line, as well as its stock price. Selling that stake right now would cost taxpayers $14-16 billion. GM’s IPO was $33 when it went public again in 2010. It closed at 19 on Friday. A bad couple of quarters caused by delinquent loans would only exacerbate the problem Uncle Sam has in trying to dump GM stock without losing too much of our original $25 billion investment.

Mitt Romney thinks we should sell the shares and be done with it. But some analysts believe that the true value of GM stock is near $45. There is little confidence, however, that General Motors can turn itself around and regain some of its dominant market share lost in the last decade.
And they probably won’t do that by racing to the bottom of the barrel to find customers.


http://pjmedia.com/tatler/2012/07/28...ousing-market/ 
 

[DDZ]

Government has no business at all holding shares of a private company. Of coarse government had no business bailing GM out in the first place. Yet many people see no problem with this. It was all about propping up union jobs knowing that the money from members dues would come directly back to Obama's and other marxists reelection efforts.
Here is a quote from Dan Akerson the union approved head of GM. "You know what I would rather do-this will make my Republican friends puke- as gas is going down here now, we ought to just slap a fifty cent or dollar tax on a gallon of gas. People will start buying more Cruzes and they will start buying less Suburbans".  That is right out of the communist play book.
There are the thoughts of the union leader representing the union members. We will always have leftists, liberals, and the like support this kind of garbage, but what I can't understand is some conservatives beating the union drum. If a gun shop supported the ideas of Obama and his cronies, many would not enter the gun shop anymore, but some of those same people will break their neck to get to a GM dealer, that Obama owns stock in, and calls many of the shots.   

[Dee]

GW should not have bailed out the auto makers, and neither should have Obama. It truly has been a mess and continues to be so. I suppose with all that has been said here, I must be in the bottom tier of auto buyers, although I had sworn off of GM which I had dubbed "Government Motors".
However! When I decided to buy "one more pickup" I started shopping for one that had a good gas mileage rating, as this was to be "my last pickup", and was to last me the "rest of my life" what ever that turns out to be.
Dodge mileage ratings were pitiful, and Ford only slightly better. Chevy beat them both quite handily, and I had to eat my words. Chevy in 2010, ended up being "my last pickup". It's easily maintained, runs good, looks good, and doesn't pull to the left when I pass a gas station.