General Motors and AmeriCredit Corp Deal to be Audited by a Government Bailout Watchdog

Added by Monique Robinson on September 24, 2010

AmeriCredit Corp, one of the largest independent auto finance companies in the US with business valued at $9bn, is to be acquired by General Motors (GM) for approximately $3.5bn. This takeover would give GM an in-house leasing and sub-prime financing arm to meet the huge demand for consumer that want to buy General Motors vehicles with loans.

In 2009, $50 billion was received by GM in bailout and bankruptcy from the government. This federal bail-out money will be used to finance the AmeriCredit Corp deal. Sen Charles Grassley requested the Treasury Department’s corporate bailout program’s special inspector general, Neil Barofsky, audit the deal which was at a premium of 25 percent over the price of AmeriCredit shares at the time. As reported by Reuters, Barofsky also wanted to understand the role played by Treasury officials in “reviewing, approving or otherwise participating in the AmeriCredit decision.” However the Treasury Department stated that they had no part in the deal.

The treasury owns about 61 percent of General Motors’ shares and Barofsky plans to scrutinize the IPO, underwriting and associated costs, to understand if the Treasury Department has done everything to ensure maximum return for the taxpayers.

Though the voting results by the AmeriCredit shareholders on the deal is yet to be announced, the deal closure is expected in the fourth quarter of 2010. Potential investors feel that this deal would bring stability as GM dealers will be able to offer customers in-house financing.