GM taps Wells Fargo to finance auto sales, dealers in western U.S.
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DETROIT -- General Motors Co. chose Wells Fargo & Co. to provide financing to Chevrolet, Buick, GMC and Cadillac dealers and retail customers in the western United States.
Alongside retail subvention, Wells Fargo will offer GM dealers non-subvented retail loans, and financing solutions like wholesale floorplan, and treasury services and insurance, the companies said in a joint statement.
The region includes California, the nation's largest new vehicle market and a key priority in GM's efforts to rebuild sales and market share. GM said the deal covers about 600 dealerships in California, Oregon and Washington.
The "long-term" arrangement with Wells Fargo will complement offerings through GM Financial, its relationship with Ally Financial Corp. and a leasing program with U.S. Bancorp, GM said Thursday.
GM CFO Dan Ammann said the Wells Fargo partnership "represents another step forward in our strategy to ensure our dealers and customers have consistently available, transparent and competitive financing."
The partnership could help GM in California, an important auto market, where San Francisco-based Wells Fargo has a large presence, said Jesse Toprak, an auto-industry analyst with TrueCar.com, a website that tracks auto sales and financing.
Wells Fargo has "an existing customer base of millions so they are probably expecting to tap into the existing customer base," he said.
Tom Wolfe, head of Wells Fargo Consumer Credit Solutions unit, said the deal expands the bank's "significant footprint in the West."
"It will fuel growth in our auto-finance business, an area in which we are looking to expand," Wolfe said in a statement.
Competition for Ally
The deal between GM and Wells Fargo represents more competition for Ally in the floorplan loan segment.
Ally had a 73.9 percent share of floorplan loans to GM dealers in the United States in the fourth quarter, but that was down from 81 percent a year earlier.
Last month at the NADA convention in Las Vegas, Wells Fargo and GM disclosed that they had concluded a relationship in January where GM supported low-interest loans, including some zero-percent offers, through Wells Fargo.
Thursday's announcement means that the new partnership has been expanded beyond just the occasional subvented loan offer.
Wells Fargo is also among banks vying to oust Detroit-based Ally as Chrysler Group's preferred auto lender, three people with knowledge of the bidding have said.
Ally also remains GM's biggest lending partner, financing 38 percent of the automaker's consumer business and 78 percent of dealer inventory loans, said Gina Proia, an Ally spokeswoman.
For 2011, Ally's average floorplan penetration for GM's U.S. dealers was 78 percent, down from an average of 82 percent for all of 2010.
"We are committed to the business for the long term and are pleased to have retail financing relationships with about 14,000 U.S. dealers and be part of the U.S. auto-industry recovery," Proia said.
Ally, formerly GMAC LLC, used to be GM's captive finance arm and is the largest provider of loans for the automaker's customers.
Ally has a deal to provide incentive loans to GM customers that will expire in 2013.
"Ally remains an important business partner to GM and its dealers," Jim Cain, a spokesman for GM, told Dow Jones.
Cain declined to say what GM plans to do when its deal with Ally expires, Dow Jones said.
In 2006, GM was forced to divest a majority stake in Ally Financial to raise cash. The move was also meant to sever then-GMAC's potentially more favorable credit rating from parent GM's credit rating, which was under pressure.
In late 2008, GMAC converted to a bank holding company, which was later renamed Ally Financial.
GM created GM Financial after purchasing subprime lender AmeriCredit Corp. in 2010. GM Financial is launching floorplan lending in April, which represents even more competition for Ally's share of the floorplan business.
The U.S. government now owns 74 percent of Ally after a bailout during the 2008-09 financial crisis.
Under Ally's financing deal with Chrysler -- which expires April 30, 2013 -- the lender provides funding to the automaker's dealers in the United States, Canada, Mexico and other regions to buy inventory.
Chrysler also is required to reserve for Ally a certain portion of incentivized financing to car shoppers.
Editor's note: An earlier version of this story included an incorrect figure for the number of GM dealerships affected by the Wells Fargo deal. It is 600.
Jim Henry, David Phillips, Bloomberg and Reuters contributed to this report
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