Nothing in life is seldom ever black & whiite

One might ask where is the money made in these new big box stores ? In the new economy with all of these new advanced electronics ? For example what business is the big box store chain Best Buy in ? Electronics ? Hardly. The answer is that best buy , along with most other big box stores is a finance sales operation along with being a factory to sell extended service warranty plans of dubious value..

Money in retail it seems is not made in the sales or even in the service. Customers are too bright now – the occasional hard shopper is now almost every shopper. The same holds true in the automotive industry. Retails sales whether it is cars , electronics or even real estate has been cut to the bone.

So why should it surprise anyone that GM is now attempting to reenter the credit finance field and fields after being forced to divest itself from its crown jewel GMAC

Note the following article in the informed automotive trades:

GM just announced that it’s going to buy AmeriCredit. Why? Because without a captive finance arm, GM can’t reach customers who have terrible credit:

GM sees the acquisition as a way to drive up sales, which is critical as it plans a return to the public stock markets as soon as this fall.

“Dealers and customers have said not having an in-house finance arm hurts our ability to offer loans and leases,” GM Chief Executive Edward E. Whitacre Jr. said in a conference call with analysts and the media. “We were not as competitive as we could be.”

The move comes after months of strategizing by GM’s top executives over how to compensate for the loss of control over GMAC.
Auto companies use finance arms to make credit available to boost sales of cars and trucks. Without a finance arm, GM has said it hasn’t been able to reach as many customers with subpar credit scores with lease deals.

This is bizarre on many levels. First of all, rather than remaking the old model that didn’t work, this move makes GM seem intent on recreating it. The reason the automakers became ready victims of the financial crisis is that they had essentially become banks with a sideline in auto manufacturing. As they got worse at the auto manufacturing part, they had to become more aggressive on the banking side. When credit dried up, the whole house of cards collapsed.

Running an auto firm is undoubtedly much harder than it looks–and it looks pretty hard. But would it be crazy to suggest that, rather than using high-rate loans to goose sales in advance of a shotgun IPO, GM could take some time and concentrate on, I don’t know, making cars that people want to buy even if they can’t get bad lease deals?

On the government side, it’s even odder. Pushing GM back into the subprime credit market seems to raise the odds that GM is eventually going to require another bailout. Meanwhile, it entices more consumers into the subprime credit market, which I didn’t realize was currently a goal of government policy. And it does all this with billions of money that could be used to, say, repay the government. The only upside for the administration that I can see on this deal is that it might give Democrats a temporary boost in November by making the IPO seem marginally more likely to succeed.

source : http://www.theatlantic.com/business/archive/2010/07/gm-to-purchase-auto-finance-company/60252/

Nepon Auto



Eagle Ridge GM - Buying a New Car
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