President Obama has touted General Motors GM as a successful example of his administration’s policies. Yet GM’s recovery is built, at least in part, on the increasing use of subprime loans.
The Obama administration in 2009 bailed out GM to the tune of $50 billion as it went into a managed bankruptcy. Near the end of 2010, GM acquired a new captive lending arm, subprime specialist AmeriCredit. Renamed GM Financial, it has played a significant role in GM’s growth .
The automaker is relying increasingly on subprime loans, 10-Q financial reports shows .Potential borrowers of car loans are rated on FICO scores that range from 300 to 850. Anything under 660 is generally deemed subprime.
By spring 2010 GM’s new management, led by North American executive Mark Reuss, wanted to move back into subprime, fearing that GM couldn’t compete. Jim Cain GM spokesperson states “subprime lending in cars is not as risky as in housing. Car loans are cheaper, so customers have an easier time making payments. When they do go into default, the cars can be repossessed and sold to recover some of the loss.”
Government continues to push subprime loans. Car ownership like housing is a right..
Tags: GM, subprime loans
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