General Motors Financial Company (GM Financial) is set to reacquire GMAC UK in a global swoop for the international fundingoperations of Ally Financial, while Santander has announced plans to pull out of the US, and Vauxhall, the biggest-selling brand under the GM umbrella in the UK, has declared it won’t chase fleet sales to close the registrations gap on Ford.
GM Financial will acquire many of Ally Financial’s international automotive financing operations, including GMAC in the UK, from mid-2013 at a cost of $4.2bn (£2.6bn).
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Created in 2010, GM Financial is the wholly-owned finance subsidiary created after the sale of GMAC by parent manufacturer General Motors.
In a conference call to reporters, Dan Ammann, senior vice-president and chief financial officer at GM, said: “We’re bringing those parts of Ally back into the family.”
Ally bought the finance operations of GM outside the US in 2006 as the carmaker’s business contracted in the mid-2000s. Thoseacquired operations were renamed Ally, except in the UK where it still operates under the trading style of GMAC.
Now, with Ally three-quarters-owned by the US government, and GM recovered from the bankruptcy of Chrysler and expiry of Pontiac and Saturn, much of that business is returning to its manufacturer parent. By the end of 2011, 97% of Ally’s wholesale vehicle financing and 82% of its retail financing was for GM dealers and customers.
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By GlobalDataThe companies were entwined enough for Mohak Rao, director of the Financial Institutions Group at Fitch Ratings to call GM the “natural buyer” for Ally when it put its international financial, insurance and banking operations out to tender this summer.
Subject to regulatory approval, GM Financial will purchase Ally’s motor financing operations in Austria, Belgium, Brazil, Mexico,Colombia, Chile, France, Germany, Italy, the Netherlands, Sweden and Switzerland, as well as Ally’s 40% share of a joint venture in China with SAIC.
The buyout comes despite, at the time of the tendering by Ally, GM Financial warning in a regulatory filing that doing so would incur “substantial amounts of indebtedness” and now expecting its liabilities, including consolidated debt, to increase from $12bn to $27bn.
As expected by GM in August, the assets of GM Financial will double to approximately $33bn. The acquisition includes an injection of $2bn by GM into GM Financial to boost equity and ensure a pro forma capital structure, in expectation of adding between $300m and $400m to GM Financial’s annual pre-tax earnings.
Meanwhile, falling continental sales are predicted to leave GM Europe (GME), including Vauxhall in the UK and Opel in Europe, between $1.5bn and $1.8bn in debt at the end of 2012 and a tie-in deal with PSA Peugeot-Citroën has been held up following the French government bail out of Banque PSA, captive finance provider to both French marques, which would put pressure on Opel to shed jobs. GME’s planned recovery from these factors includes an “aggressive rollout” of 23 models and 13 engines alongside which, Ammann said, the acquisition of Ally’s operations “will make us an even more formidable competitor by ensuring that competitive financing is available to our customers and dealers around the world.”
At the same time, Vauxhall chairman Duncan Aldred has said the brand will not target fleet sales to gain UK market share on Ford and will focus instead on retail.
Speaking to Car Dealer magazine at the Paris Motor Show, Aldred said the marque this year was not chasing market share, butfocusing instead on retail sales.
“We won’t target fleet sales at all costs just to grow registrations,” he explained. “We need to focus on more profitable retail sales.”
Similarly, Vauxhall has shown its willing to maximise the added value of retail finance by accepting terms from both GMAC andindependent finance provider Santander Consumer Finance (Santander CF) on the brand’s 0%, five-year Flexible Finance package in July. Provision of the scheme, available through Vauxhall dealerships and initially run by GMAC, was switched to Santander in March, a surprise to much of the industry.
What effect the acquisition of GMAC by the parent company of Vauxhall will have is yet to be seen while Santander CF’s bank parent considers listing its US car financing division for as much as $6bn, as it sells off overseas businesses in the wake of poor economic conditions in its home market of Spain.
The business, based in Fort Worth, Texas, offers loans through more than 13,000 US car dealers and has a loan portfolio of about $18bn (£11.26bn).
Santander raised $4bn in a US listing of its Mexican banking business in September. It has already listed its Brazilian and Chilean arms, and its Argentinian and UK businesses are expected to follow.
richard.brown@timetric.com
