GM Financial declared a $375 million dividend on Oct. 30, which General Motors will be reflected in the GM’s fourth-quarter earnings. According to Automotive News, the dividend represents the first in a series of annual payouts the captive finance company will pay to General Motors into the early 2020s.
The dividend, pay from GM Financial to its parent company General Motors, shows signs of contributing significantly to the company’s future endeavors, where the profits will help fund needed investments in emerging technologies such as electrified and autonomous vehicles, or perhaps improving core market products such as pickup trucks.
In 2015, General Motors announced a target to more than double pre-tax earnings of $803 million from 2014 to as much as $2 billion for GM Financial by 2018. The estimates seem on track, as GM Financial pre-tax amounted to $1.48 billion at the end of Q3 2018.
In 1919, GM established General Motors Acceptance Corp., the industry’s first captive finance company. Originally meant to finance auto sales transactions, GMAC later diversified into other financial services, such as insurance and mortgages – often criticized as a strategic error when 2009 came around. GM twice reduced its stake in GMAC, first in 2006 and then in 2009, as part of its government bailout loan and bankruptcy restructuring. From the divestment emerged Ally Financial, an independent financial firm which continued finance GM dealers and customers.
GM Financial was formed in 2010 with the acquisition of subprime lender AmeriCredit. From there, GM Financial expanded into prime and floorplan lending, slowly taking business back from from Ally. GM Financial currently finances 50 percent of GM’s retail vehicle sales in the United States, with the goal of expanding that number. The more GM Financial is able to finance, the more General Motors can control its customer data and attempt to keep off-lease customers in the fold.