GM agrees to buy Ally's European auto-finance business
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DETROIT (Bloomberg) -- General Motors agreed to buy the rest of Ally Financial Inc.'s international auto-finance businesses, including operations in Europe, in a deal with proceeds of $4.2 billion.
The purchase by the GM Financial lending arm covers units in Latin America as well as Ally's 40 percent stake in an auto-lending joint venture in China, Ally said on Wednesday in a statement.
The transaction includes operations in Germany, the United Kingdom, France, Italy, Belgium, the Netherlands, Sweden, Switzerland and Austria.
"GM is entering the most aggressive rollout of new vehicles in its history and this acquisition will make us an even more formidable competitor by ensuring that competitive financing is available to our customers and dealers around the world," GM CFO Dan Ammann said in a separate statement.
GM, which counts the U.S. government as its biggest shareholder, is seeking a turnaround in Europe, where it has lost more than $17 billion since 1999. In South America, GM posted a $122 million operating loss last year that followed a 2010 profit of $818 million.
GM relies on North America for most of its profit and is looking to diversify revenue sources.
Ally CEO Michael Carpenter, 65, is selling assets as he seeks to repay taxpayers for a $17.2 billion rescue during the credit crisis. He's narrowing the focus of his firm, formerly known as GMAC Inc., to auto lending and U.S. banking. GM owned GMAC until 2006, when the automaker sold 51 percent of it to Cerberus Capital Management LP.
Divesting international units may help Ally repay two-thirds of the government rescue, Carpenter said in a May interview. In October, he agreed to sell a Canadian unit to Royal Bank of Canada in a cash deal providing $4.1 billion in proceeds. Ally also agreed to sell a Mexican insurance business to Ace Ltd. for $865 million.
Acquiring some of Ally's assets would help GM offer competitive loans in South America, where about 50 percent of car sales are financed, Jaime Ardila, president of that region for GM, said last month in an interview in Sao Paulo.
The U.S. government owns a 32 percent stake in GM, a legacy of the company's 2009 federal bailout and bankruptcy.
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