Brands Vauxhall and Opel, as well as Chevrolet, have announced their official partnership with General Motors Financial Company (GM Financial) to supply captive finance. Vauxhall has, however, continued to work with Santander Consumer Finance by providing finance deals for the brand’s national used car programme Network Q. Also this month, Ally Financial, previous finance provider to the brands, has confirmed its priority is to reimburse the US Treasury for the bail-out it received in 2010.
All three brands are part of General Motors (GM), and provision of finance for Vauxhall vehicles in the UK, Opel in Europe and Chevrolet in both, comes as GM Europe aims to recover depleted sales and operating losses. Even while aiming to reduce fixed costs by $500m (£325m) between 2013 and 2015, GM Europe plans to introduce 23 models and 13 engines during that time. These include the Mokka and Adam models, with which Vauxhall and Opel aim to attack the burgeoning respective SUV and supermini markets.
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Last year GM reacquired much of the global motor finance operation it had sold to Ally in 2006 and will begin offering finance products through GM Financial, branded as Vauxhall Finance in the UK, Opel Financial Services (Opel FS) in seven continental markets and Chevrolet Financial Services in the UK, Italy, Belgium, the Netherlands, Luxemburg, Sweden, Switzerland and Austria.
GM Financial has already invested $1.7bn in European operations, and is aiming to double its global portfolio from $16bn to $33bn, with liabilities up from $15bn to $27bn.
Michael Lohscheller, chief financial officer at Opel, said products from Opel FS will include 0% interest and zero deposit schemes and formed "an integral part of our plan to gain market share and return to profitability".
The switch to a captive finance operation would provide more cost-effective wholesale finance and refinancing opportunities, in turn making car loans and leases cheaper to provide, the company said.
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By GlobalData"Opel was not always in a position to make the best financing offer," said Lohscheller. "We did not have our own bank, like competitors".
Lohscheller estimated the current finance penetration rate on Opel vehicles stood at 40%, below the European market average of
50%, itself below the UK market new-car rolling total for the 12 months to March of 72.9%, according to the Finance & LeasingAssociation (FLA).
Susan Docherty, president and managing director of Chevrolet and Cadillac Europe, said the finance offers the arrangement would make available were "a vital step in our continued effort to grow our business in Europe".
Mark Bole, president of international operations for GM Financial, added: "The strength of our existing relationships with Chevrolet dealers in Europe will be further enhanced as their captive.
"This also offers opportunities to enhance product offerings and generate incremental sales for Chevrolet."
In the UK, where Vauxhall was the second-biggest selling marque in 2012 with 232,255 new car registrations (2011: 234,710), Vauxhall Finance has already used GM’s in-house provider to launch the 2.9% APR Vauxhall Flexible PCP on multiple models including the Mokka and Adam. Despite the name, the product is separate from the 0% prime-market Flexible Finance range which GMAC, the trading style of Ally Financial in the UK, provided last summer, to compete with Santander when the Spanish bank announced it would match GMAC’s terms.
Vauxhall continues to work with Santander, with the two companies announcing details in April of a 6.9% APR PCP offer, among others, for used cars sold through Network Q.
According to the FLA, the used car finance market for the first quarter of 2013 was worth £2.01bn across 215,958 registrations. And according to used car statistics from Experian, Vauxhall had the third- and fourth-best selling models of 2012 in the second-hand market with the Corsa selling 298,206 units and the Astra 272,251.
Meanwhile, Ally Financial, the Detroit-based finance provider, has said it remains focused on repaying the US Treasury Department, which owns $5.9bn in mandatory convertible preferred stock in the company. The Treasury also owns 74% of Ally since bailing out the company with an injection of $17.2bn in 2010, of which approximately $6.1bn has now been repaid. Ally was also deemed to have failed the US Federal Reserve stress test for larger banks in March and is now in discussions to resubmit a capital plan to the regulator.
However, Jeff Brown, senior executive vice-president of finance and corporate planning at Ally, said the company’s priority was the elimination of preferred shares held by the Treasury, which come with a 9% dividend and is not counted as capital by the Fed. So far, Ally’s mortgage subsidiary Residential Capital has filed for bankruptcy in the US, while the company has sold other mortgage business and much of its global motor finance operation back to GM.
The sale of Ally’s international business, predominantly but not entirely to GM in car finance operations, has brought in 70% of expected proceeds, according to Michael Carpenter, chief executive at Ally. These funds are earmarked to repay the Treasury and have seen the company’s first-quarter profit rise to $1.1bn in 2013, from $310m in 2012, predominated by a gain of $900m from the sale of Canadian operations, including the sale of car finance operations to the Royal Bank of Canada for $4.1bn in October.
Ally’s profit from retail car finance was up 42% year-on-year in Q1 to $343m, while US consumer originations totalled $9.7bn, on a par with last year but up by 9% on the previous quarter.
However, Ally saw a reduction in its manufacturer agreements, such as originations from subvented loans through Chrysler dropping to $200m in the opening quarter, down from $500m in Q1 2012, and $300m in Q4 2012.
richard.brown@timetric.com
