SOUTHFIELD, Mich. — US Senator Charles Grassley asked the special inspector general for TARP to look into the details of General Motors Co.’s plan to buy a subprime auto lender and the Treasury Department’s involvement in the acquisition.
GM and AmeriCredit Corp. announced the deal yesterday, an arrangement intended to help the automaker reach more customers with damaged credit ratings, or those who want to lease a new car or truck. The purchase will be made with cash GM has on hand, said Chris Liddell, chief financial officer.
“If GM has $3.5 billion in cash to buy a financial institution, it seems like it should have paid back taxpayers first,’’ Grassley, a Republican from Iowa, said in a statement on his website. “After GM’s experience with GMAC, which left GM seeking a taxpayer bailout, you have to think the company and, in turn, the taxpayers would be better off if GM focused on making cars that people want to buy and stayed clear of repeating its effort to make high-risk car loans.’’
GM, of which 61 percent is owned by the US government, is acquiring AmeriCredit, based in Fort Worth, Texas, for $3.5 billion. The share price of $24.50 is 24 percent more than AmeriCredit’s closing price yesterday of $19.70 a share in New York Stock Exchange composite trading. AmeriCredit rose to $23.91 at 4 p.m.
“This helps GM finance less-than-perfect-credit buyers, and God knows there’s plenty of them today with economic conditions as they are,’’ said Joe Phillippi, principal of AutoTrends, a consulting firm in Short Hills, N.J. “A lot of people in the vast heartland of this country don’t have particularly great credit histories and that region has been the core of GM’s strength.’’
GM had considered buying back its former lending arm, GMAC LLC, starting a bank, or working with outside lenders to offer customers more financing options, according to three people with knowledge of the discussions. Buying GMAC, now called Ally Financial Inc., or starting an in-house banking unit proved too difficult, they said.
But John Berlau, a policy director at the Washington-based Competitive Enterprise Institute, said that as long as GM is majority-owned by the United States, it should not be in the subprime lending business.
“When we bailed out GM, what were we bailing out?’’ said Berlau, whose think tank promotes limited government. “The rationale behind the financial-regulatory bill that just passed was that subprime lending was bad, but the government’s in the subprime business.’’
Ed Whitacre, GM chief executive, said in a statement: “Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings.’’
The automaker gets about 4 percent of its sales from subprime borrowers, Liddell said in a briefing yesterday in Detroit.