Big Auto Lenders Boost Profits

Strong earnings reports flowed from major prime and subprime automotive lenders. Two companies that had reported losses Ford Credit and AmeriCredit came up with substantial earnings and optimistic forecasts for this summer. Ford Credit boosted its net earnings 72% from a year ago to $442 million in the first quarter after sharply reducing its portfolio. It also paid its parent company, the financially-strained

Strong earnings reports flowed from major prime and subprime automotive lenders. Two companies that had reported losses — Ford Credit and AmeriCredit — came up with substantial earnings and optimistic forecasts for this summer.

Ford Credit boosted its net earnings 72% from a year ago to $442 million in the first quarter after sharply reducing its portfolio. It also paid its parent company, the financially-strained Ford Motor Company, a dividend of $1 billion in March.

Ford Credit Chairman and CEO Greg Smith says its U.S. loan and lease contract volume in the first quarter was cut 28% to about 472,000. Ford Credit closed its Fairlane Credit subprime subsidiary last year and cut back on financing of non-Ford vehicles sold by Ford and Lincoln Mercury dealers.

The once subprime kingpin, AmeriCredit, Inc., followed up its decision to slash loan originations to a quarterly $750 million with a $14.5 million net profit in the January-March period.

AmeriCredit's new president, former CFO Daniel Berce, who replaced company founder Michael Barrington, promises to strengthen dealer relations as new loan acceptances fall from quarterly levels that exceeded $1.3 billion last year. AmeriCredit had dropped more than 400 “under-performing” dealers and laid off about 1,000 workers.

GMAC earned $699 million in the first quarter, up nearly 60% from a year earlier, of which finance operations contributed a jump of 18% to $302 million. GM Chairman G. Richard Wagoner, Jr., says that reflects higher asset levels as well as lower credit loss provisions.

Two independent subprime lenders — Westcorp, of Irvine, CA, and Credit Acceptance Corp of Southfield, MI — enjoyed increased earnings and revenues in the first quarter.

Westcorp's net profit rose 40% to a record $23.5 million as auto contract purchases grew 7% to $1.4 billion. The Westcorp portfolio was aided by pullbacks of Ford Credit and AmeriCredit from subprime financing, say analysts.

Credit Acceptance announced net income of $8.8 million, up from $6.3 million a year ago. Loan originations rose 20.8% to $232.0 million due to a rise in the number of loans per active-dealer partner.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish