GM captive doubles profits, boosts lending in Q4

GM Financial more than doubled fourth-quarter profits and boosted loan and lease originations as General Motors' sales and average transaction prices rose.

GM Financial's net income surged to $776 million during the latest period, GM's captive finance company said in a statement last week.

"We realized larger availability of off-lease vehicles. Credit was much better year over year, and we had less interest expense because of declining lease interest rates," CEO Dan Berce told Automotive News.

Retail loan originations swelled 39 percent to $7.6 billion, and lease originations increased 10 percent to $6 billion, largely on higher GM sales and increased loan and lease amounts.

GM's U.S. light-vehicle sales rose 4.8 percent in the fourth quarter, as retail sales began to reach pre-pandemic levels and redesigned full-size SUVs hit the market. It was GM's strongest fourth quarter on a retail basis since 2007. Retail deliveries increased 12 percent, the automaker said last month.

GM's average transaction price during the fourth quarter rose 6 percent to $43,855, according to TrueCar.

GM Financial financed 41 percent of GM's retail sales in the quarter, up from 38 percent a year earlier. Berce expects GM Financial's share of GM loans to be consistent or slightly higher this year.

Fourth-quarter revenue fell 5.7 percent to $3.4 billion as the captive's lease and commercial volume declined, Berce said.

GM's captive earned $2 billion in profit for the year, up 28 percent from 2019. Revenue fell 5 percent to $13.8 billion.

Retail loan originations rose 19.7 percent to $30.1 billion, and lease originations fell 12 percent to $19.7 billion.

GM's U.S. sales decreased 12 percent to 2.5 million for all of 2020.

Last year, GM Financial paid an $800 million dividend to GM, and Berce expects to make a payout at or above that level in 2021.

GM Financial in 2021 will prioritize digital solutions when communicating with dealers and consumers, said Berce.

"What we saw in 2020 was an acceleration of digitization of everything about the car-buying and customer service areas," he said. "We're really focused on our digitization efforts from ... our credit application to auto decisioning and really self-help for dealers as they put deals together."

The captive will use data analytics, which it has long used for underwriting, to optimize marketing and communication with customers, said Berce. For example, analytics can suggest a more effective cadence for calling customers who are delinquent on loan payments for better results, he said.

In 2020, GM Financial launched an artificial intelligence chatbot to help manage customer messaging. This year, the captive aims to have the new AI chatbot or traditional robotic messaging systems become the points of contact for 50 percent of customer queries. Of that, GM Financial hopes that the chatbots will be able to resolve half of all inquiries without elevating them to a GM Financial employee.

Berce said GM Financial is also well-positioned to finance fleets for GM's new BrightDrop brand, which includes an electric delivery van.