GM Financial, the captive-lending unit of, says it wants to acquire the international operations of Financial, a move that would bring a slew of new customers but at the same time add debt to the auto maker’s balance sheet.
GM, as well as a number of other suitors, submitted bids foroperations in Canada, Mexico, Europe and Latin America last month, and those offers are being analyzed, the auto maker says in a regulatory filing early today.
Terms of the offer were not disclosed.
GM says in the Securities and Exchange Commission filing the acquisition could “expand its operations materially in international markets” and have “significant impacts on its business, results of operations, liquidity and financial condition.”
The auto maker also speculates the deal would double GM’s Financial’s assets, estimated at $10.4 billion in receivables and leased vehicles. However, the acquisition also could double GM Financial’s debt and consequently add debt to the auto maker’s balance sheet, currently at $5.1 billion compared with $38.5 billion in available cash.
Growing GM Financial plays a key role in GM’s restructuring from its 2009 bankruptcy. A captive-finance arm typically makes vehicle loans more easily available to car buyers and often at lower interest rates. It can stimulate return business, too.
Captive finance units also tend to be more willing to take on risk, such as loans to sub-prime credit candidates from whom GM wants to gain more business.
GM formed GM Financial in 2010 when it acquired the former AmeriCredit of Fort Worth, TX, for $3.5 billion.
GM Financial earned $200 million for the auto maker in the second quarter, double what it made in the same period a year ago and reflecting the growth in its lending activity. According to GM, 45% of its new-car sales now are funded through GM Financial loans.
Private-equity firm Cerberus Capital bought Ally from GM in 2006, when it was known asAcceptance Corp. Ally also went through a taxpayer-funded bankruptcy. In the short time GM did not have a captive-finance arm it was at a competitive disadvantage to other auto makers, especially in the leasing market.