GM + Subprime Borrowers = What? (rant)

[phbrown]

I know I know absolutely nothing concerning what it takes to run an organization the size of GM. But when I see article like the following it makes me wonder why take the risk?

http://www.autoblog.com/2010/07/22/gm-americredit-buy-3.5-billion-breaking/

According to the article GM is planning on buying americredit for 3.5 billion dollars. Because people who have been trying to purchase cars from the GM dealerships are having trouble finding financing.

GM says that putting AmeriCredit under its wing is the next logical step in moving toward an IPO, and most analysts seem to agree. The carmaker had been criticized for not having an in-house financing arm in the past, but the new move should afford the company and its dealership network an added level of financing flexibility. It should also allow GM to return to leasing in a big way.

Is the money to be made off of subprime borrowers that great that the risk is justified?

Why was there a bailout for for GM?


you know what nevermind this is just why I don't buy stock in GM. I don't like their management.

If GM would have said something like we know not as many people can afford a $40,000 Truck therefore we are going to start producing this $12,000 truck which is not going to have any unnecessary changes for the next 10 years.

I mean if the 2011 model was the same as the 2010 model GM could work their inventory better. I understand the reason why they make small changes every year it spurs people to buy a car that they normally wouldn't buy.

I guess in the end I was really hoping GM would come out of this situation smaller, leaner, and ready to dominate China's and Korea's market.









Go buick!!!

Okay I'm done

[funkStrat_97]

The sub-prime lending industry brings to light the consequence of having bad credit with a little bit of a twist.  There are things in this life that we either need or desire to have that are just too expensive to purchase outright.  For a "reasonable" fee, a bank or other financial institution will lend you money towards making that purchase.  However, if you have bad credit, the lenders will decide that there is a good chance, based on your credit history, that we wont get our money back so we are not going to lend you a dime.  But then too, our credit rating system allows a lender to charge you a higher fee (i.e. interest rate) which means that there is the possibility of making more money off of you if you actually pay back the money.  If you don't pay it all back, the higher interest rate will at least help minimize the loss on your default.  So you have mutual assent: your need and the lender's greed.  But therein lies the rub: if you had difficulty repaying a loan at a fair or reasonable rate, how are you going to fulfill that obligation when it's going to cost you even more money out your pocket towards that end?  It used to be that if you were able to survive for a couple of years while struggling to meet your obligation on time that somebody would reward you for your efforts and offer the opportunity to refinance at a lower rate and after you've completed paying off this lone, you get a gold star on your credit report.  But now, banks don't seem so eager to lend out money these days unless you have really really good credit. 

Recently, it was announced that many people now have low credit scores which makes them prime candidates for a sub-prime loan.  This is golden opportunity for a company, such as GM, to take advantage of the situation and sell some product (cars in this case) while their financial services division racks up high interest revenue.  Now when people start defaulting and cars start being repo'd, the higher that interest revenue might be enough to shield the company from serious financial indemnity.....at least theoretically. 

[phbrown]

Now when people start defaulting and cars start being repo'd, the higher that interest revenue might be enough to shield the company from serious financial indemnity.....at least theoretically. 

I hope your right... I really do

[JustBritt]

Say what???