Having just closed the sale of its European Opel-Vauxhall division to PSA Groupe, General Motors will downsize its captive finance arm, GM Financial (GMF).
The “new” General Motors formed GM Financial in 2010 by acquiring subprime specialist AmeriCredit of Fort Worth, Texas. Since then, it has built up the unit by adding floorpan and commercial loans for dealers along with prime-risk retail loans and leases. In 2013, the captive finance arm introduced its services to Europe and South America as a result of acquiring the international operations of Ally Financial (previously GMAC under the “old” GM) for $4.2 billion.
But now, GM Financial’s European auto finance operations have been transferred to PSA Groupe as part of the Opel-Vauxhall sale — significantly downsizing the subsidiary’s footprint. GM and GM Financial began accounting for Opel/Vauxhall as “discontinued operations” at the start of the second quarter of 2017.
Even so, GMF is growing in North America as GM continues to push GM’s services in its dealers while steering retail loan and lease incentives. GM Financial’s net income from continuing operations (in other words, those outside of Europe) was $270 million in Q2 2017, an increase of 89 percent year-over-year. But the unit’s net income fell from $189 million to $62 million for the quarter as a result of a $208 million net loss from discontinued operations.
Comments
No big surprise, GM is shrinking everything else and moving in the opposite direction to every other major automaker in the world. All part of the new little tiny provincial General Motors. Not long before Toyota swallows them up – 10 years max.
I see your point, and it isn’t without merit on the providencial/regional wife of things. But in order for anyone to buy GM outright, they would need at least $50 billion (GM’s market cap as of right now).
But to do a hostile takeover, the number would need to be about $75 billion due to appreciation on rumors of the acquisition and GM’s ongoing share buy back program, which appreciates the stock value.
Toyota has roughly $15 billion USD on hand and not much growth perspectives, so it will likely stay there. Tough to raise 4x that kind of capital, in free markets or otherwise.
It won’t be necessary, GM’s market cap will shrink along with the rest of the company, it’s overvalued now which is one of the many reasons the share price has remained static. Toyota or whoever it may be, will just wait until the right time & price.
The market cap will only shrink if the company performs worse than it does today, which is unlikely given the withdrawal from unprofitable operations and the coming efficiencies in platforms (VSS effort), plus the wave of new product in the right volume segments (crossovers) and high-profit segments (Cadillac).
That said, I would like to see GM return to being a global automaker with its current brands.
Cash is king just look at their balance sheet. Shrinking the balance sheet in the right direction can make a positive impact on cash flow, especially in a downturn. If any stock ISO representative fed it is FCA with its heavy debt load and suspicious accounting, much like they tried to keep their sales increase going by reporting fake sales?