"The main driver in all of that is we just want to be consistent because it will help us with our dealer relationships," said COO Kyle Birch. "It gives us opportunities to grow our portfolio, hit our earnings, be able to pay a dividend back to GM like we did towards the latter part of '18. So, it's just a more smooth captive model."
GM Financial formed in 2010 after GM acquired subprime lender AmeriCredit and then expanded its business by adding services such as prime and floorplan lending. It also took or acquired business from Ally Financial, which had been GM's original auto finance arm, General Motors Acceptance Corp., before GM gradually sold off GMAC to raise money beginning in 2006.
GM Financial paid GM a $375 million dividend on Oct. 30. That marked the first in a series of annual payouts GM Financial will give GM until the lender consistently holds 50 percent of GM's retail sales penetration in the U.S., which is expected to occur in the early 2020s.
And after some glitches following a systemwide technology conversion left many customers with problems on their credit reports in December 2017, GM Financial is ready to invest in more digital transaction technology.
"Now we need to focus back on not just fixing some things from the conversion, but to really get more focused on how do we continue to make the customers' experience better," Birch said.
Birch, 58, spoke with F&I Editor Hannah Lutz in January on the sidelines of the American Financial Services Association's vehicle finance conference. Here are edited excerpts.
Q: Why is it important to GM Financial to keep its share of GM sales above 50 percent?
A: With a good consistent share there, we pretty much know based on sales records or forecast, what kind of volume is going to be coming into our portfolio. Then we can do things on the back end to help the customer experience. Our main goal is to drive them back to the originating dealer to give our GM dealer the first opportunity with that customer.
What is GM Financial's stance on subprime originations this year?
We would love to grow it. From a capital investment standpoint, it's one of our most profitable segments of business. And given our history with AmeriCredit, we're very good at it. We partner with a lot of good vendors, like the credit bureaus, that help us with some of the enhancements that we have to our scorecards. We're very good at predicting the risk, pricing the risk and then giving subprime customers an opportunity to purchase a vehicle. Because we are a full captive, we're obviously going to have a much heavier prime mix every month when we look at new originations. But we constantly look for opportunities to grow the nonprime business. We still operate the AmeriCredit brand, so for any non-GM dealer, that's the brand we carry in the store. We still do all the things we need to do to mitigate risk, and we're not going to get outside that bubble. Over the years, we've seen there's always enough volatility in nonprime that there's always somebody going in and out of the space. So we always want to be poised where if someday one of the major banks or independent companies pulls back their share, then we view that as an opportunity for us.
How should lenders and dealers improve their auto finance and retail technology?
I'm still a very big believer that this industry is a relationship business. We can improve technology. We can get more efficient. But I think the biggest thing we have to understand as an industry from a dealer and lender perspective is that the consumer today is more educated. They're shopping online; they're building their vehicles online; they're looking for financing online. And I think we have to partner with our dealer customers to create an environment where we can help our dealer, and our dealer can help us make that customer's experience even better as they move through the process.
Most customers will still tell you that it takes too long to buy a vehicle. And I think the dealers that understand that and partner with their OEM and their captive, they'll be the dealers that are here in the long run. It's like any business; your customer is going to have demands of you, and you have to create an environment that customer expects. And there's a lot of progress there.
How is GM Financial investing in digital products?
We're going to have a lot of conversations and a lot of investment in the digital end-to-end for the consumer and the dealer. Obviously, at the end of the day that helps save money, which is good for everyone. And the customer gets their wish, which is maybe they didn't have to spend four hours in the dealership; maybe they did almost everything they wanted to do online.
We do have to partner because we all have skin in the game through that process, including the [automaker], because they want those customers to return. And it is one of the big reasons why we make such an effort to increase our share of GM sales. The more customers we have in our portfolio means the more opportunity for loyalty and retention. Since 2016, we've been the leader on the lease side of that. We've been the leader on the loan side of that. As a captive supporting our [automaker], that's where we want to stay.
We want the customer to have a good experience, and we want them to do business with us the way they want to do business. That's everything from us answering a phone to them servicing their account online or on their mobile app or whatever they want to do. We need to be positioned to help them.