GMAC Again?

GMAC Again?A Look forward – But First a Look Back

So here we all sit watching General Motors make another bold move. But first before we talk about the latest and greatest let’s look back. Years ago GM sold off the GMAC unit to a third party. The proverbial cash cow is tossed to the wind. Many in the industry said that was foolish due primarily to the fact that it was such an integral part of the overall business model. Nonetheless it was sold. General Motors continued to operate ineffectively after that transaction. They continued to receive criticism from the observation gallery about the transaction. The dealer body thought it was a stupid move as well.

Fast forward. GM purchase a second rate subprime finance company recently. All of a sudden someone at the helm begins to awaken. Next GM decides we need our venerable GMAC unit back. “Let’s get back in the business of finance!” What genius will get credit for this one? When I read about the purchase of the subprime unit I was not surprised but a little dumbfounded. They got kudos from Wall Street like this was a revelation. Now Wall Street is amping the volume up again about the latest revelation that they need to enhance the finance arm.  To this I say hogwash! The business model should have never excluded them from the finance business to begin with.

Rewarding a Pencil Pushing Wunderkind

Now some pencil pushing wunderkind will be touted around the company as the next Bill Gates for coming up with this new and “fresh idea”. They will be given some notable bonus and the clock will continue to tick away. We as shareholders will continue to wonder who is at the helm and what map they are  looking at. I say never reward stupidity. I know I have never been rewarded for it because if I ever was I would be a billionaire by now.

Because of my role in the development of AutoStar, I keep abreast of automotive industry matters. Next I have the good fortune of speaking with dealers all over the country. I speak frequently to the displaced General Motors dealers as well as the survivors. What I can tell you is Ally Bank is doing a poor job at servicing and managing the opportunity they have in providing financing to the dealer body as a whole.

Ally Bank?

GM needs a replacement service.  Ally is just not what the industry needs. There are too many inexperienced poor quality field managers that do not understand, let alone execute, the much needed wholesale financing service the average dealer needs to remain competitive. I hear every day how they are fumbling the ball. I even have been in some negotiations with the “boys” from Ally and I am surprised in some cases that they were even picked to do the job on the first place. They continue to toss perfectly good clients under the bus. The credit qualification standards are archaic. Their overall approach is crude and very unprofessional. Simply they need to be jettisoned out of the picture. They have no vested interest in this industry. They do not care and thus they can destroy the industry from within at a critical time.

Cartographers Who Can’t Read Maps

But back to the cartographers at GM. I say you read the map wrong years ago. No you should not be rewarded for doing what you should have been doing all along and that is to provide a captive finance source. Read the map boys! If you have to,  go back a couple of decades and read the annual reports. GMAC was part of your original mission! If you are going to put it back together put in a floor plan program with modern management mechanisms. Put in consumer lending products that meet the market demands. Provide what will work! Do not provide something for the sake of Wall Street. Pay attention to your dealers! They are your lifeblood. They are not a disposable asset which is how you have been treating them. They too have been around as long as you have. And oh by the way, don’t buy a percentage buy control or all of it! Get back in control of which way this ship is headed.

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George Lovato, Jr. is President and Principal of BH Capital Ltd., Merchant Banker, Consultant, Author and Lecturer. Happily married for over 30 years to his childhood sweetheart Gale, they live nestled in the shadows of the Sandia Mountains in Albuquerque with their six hounds.

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2 Responses to GMAC Again?

  1. John Mecham January 13, 2011 at 10:54 am #

    I hope the “new” GM boys read this article. It is right on. I saw the arrogance and stupidity in the old GM when I was a Buick dealer a few years ago. I thought the bankruptcy would cure the arrogance and it still may. Problem is you can’t fix or change stupid.

    God bless the auto dealers of America.

    • George Lovato Jr. January 14, 2011 at 9:01 am #


      You are right that you cannot fix stupid. The bigger problem is that auto dealers have been viewed as a disposible asset. That is just wrong. Without the dealers the factory would have nowhere to sell its goods. Capitve finance is only part of the answer. Management is the other along with providing product that the consumer will buy at prices that make sense with affordable financing. Thanks for your comment.