General Motors buys Ally Financial foreign operations

Dan Roth — Sat, 24 Nov 2012 17:01:00 EST

Filed under: Government/Legal, GM, Earnings/Financials

In a move that welcomes former pieces of General Motors back into the fold, GM Financial has reached a deal with Ally Financial, formerly GMAC, to buy a piece of the company's international operations. The $4.2 billion deal is for Ally's Latin America, Europe and China operations.

"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," says General Motors CFO Dan Ammann. The ability to finance from a captive unit will let General Motors extend better loan terms to potential customers, which the automaker sees as key to closing a sales gap that's between 10 and 15 percent versus automakers who already have their own financing divisions.

GM will be handing over more than $2 billion in cash to GM Financial, and the unit will more than double its liabilities from $12 billion to $27 billion while also doubling its assets to about $33 billion. GM Financial expects to bolster its yearly pre-tax earnings by $300-$400 million. It will take at least six months to wrap this deal up, provided it gets approvals from various oversight agencies. For more information on the deal, check out the official press release below.

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