GM to acquire AmeriCredit for $3.5 billion ( Glad that bailout $ came in handy)

Nice to see Corporate world USA is enjoying their real-life game of Monopoly.. That Community Chest card must have been a humdinger..

http://www.reuters.com/article/idUSTRE66L24320100722



DETROIT | Thu Jul 22, 2010 8:29am EDT

DETROIT (Reuters) - General Motors Co GM.UL said on Thursday it would acquire auto finance company AmeriCredit Corp (ACF.N) for $3.5 billion in cash in a deal aimed at easing financing terms for subprime car shoppers.

The deal, which remains subject to approval by AmeriCredit's shareholders, would give GM a captive finance arm for the first time since it sold off a controlling stake in GMAC in 2006. GM dealers have complained that tighter financing terms have cost them sales in a U.S. auto market that has failed to deliver the strong recovery many had anticipated in 2010.

GM, which was restructured by the U.S. government in bankruptcy, is preparing for an initial public offering later this year, people familiar with those discussions have said.
Addressing its lack of a captive finance company removes an uncertainty for GM as it prepares for a stock offering intended to reduce the U.S. government's nearly 61 percent ownership stake.

Under terms of the deal, GM would pay AmeriCredit shareholders $24.50 per share. The stock closed at $19.70 on Wednesday.

snip

http://www.thetruthaboutcars.com/grassley-was-gms-payback-shuffle-about-avoiding-the-tarp-tax/

I am also troubled by the timing of this latest maneuver. According to Mr. (TARP Special Inspector General Neil) Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds. Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi. According to the GM 8K, GM had planned to use the TARP funds in escrow to pay back the TARP loans on a quarterly basis beginning in the fourth quarter of 2009. But following the April 20, 2010, hearing of the Senate Finance Committee, where Treasury’s decision to exempt GM from the bank TARP excise tax was questioned and GM’s refusal to testify was noted, it is odd that GM suddenly drew down on the TARP escrow and accelerated the repayment of the remaining balance of GM’s outstanding TARP loans.

The bottom line seems to be that the TARP loans were “repaid” with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:

Question: Are you just paying the government back with government money?

Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.

Mr. Girsky then said that GM originally planned to pay the loan over the next five years. So the question is why—other than a desire to justify excluding GM from the administration’s TARP tax proposal—would Treasury and GM reduce GM’s TARP debt with TARP equity and then mischaracterize it as a repayment from earnings?