GM puts the pedal to the metal at Fort Worth finance unit

General Motors is expanding again in Arlington, but not at the plant that builds sport utility vehicles.

Instead, hundreds of jobs are being added at GM Financial, the automaker’s Fort Worth-based finance unit, which has taken on a bigger role for the Detroit automaker.

In five years, GM has transformed the former AmeriCredit, a subprime auto lender that GM bought in 2010 after its bailout and bankruptcy, into a full-fledged captive auto finance company.

Last year, GM Financial began making prime loans to car buyers with strong credit scores, and this year it became the exclusive provider of lease financing on GM vehicles that carry rebates or manufacturer incentives. Subprime loans are a much smaller part of the market, made to people with troubled credit histories, with credit scores below 620.

The moves have pumped up the company’s business. In the first nine months of 2015, loan and lease originations totaled $27.9 billion, compared with $21.3 billion for all of 2014 and $12.4 billion in 2013. About 80 percent of the company’s new loans and leases are considered prime. Net income for the period grew nearly 8 percent to $515 million.

GM Financial now finances about a third of all cars that GM sells or leases in North America, and its goal is to get to more than half, said Daniel Berce, a longtime executive with AmeriCredit who is GM Financial’s CEO. With U.S. auto sales clicking along at a record pace, Berce expects 50 percent asset growth in the year ahead.

GM’s goal, he said, is to build loyalty and customer retention through the finance unit.

“There are statistics that show if a customer finances through a captive versus a third-party bank, the chance of them repeating or buying another model from [the automaker] is much higher,” Berce said. “We have to make sure we deliver a great customer experience because our mission is to help GM sell more cars.”

To handle the increased volume, GM Financial built up its systems and workforce. In the past year, the company has added nearly 1,000 workers in Tarrant County, mostly through a $30 million expansion of its south Arlington campus, which handles loan processing, customer service and collections.

The company, which operates two 250,000-square-foot buildings near Interstate 20 and South Collins Street, bought a 240,000-square foot building on the east side of Collins that formerly housed a JPMorgan Chase call center. About 500 people are already working there, and as many as 250 more will be added when renovations are completed next year. Jobs there pay $12 to $15 a hour plus benefits.

And last week, GM Financial said it will build another servicing center in San Antonio, where 500 employees will work. Hiring for the San Antonio center is expected to begin late next year.

With the expansion, GM Financial has 3,760 employees in Tarrant County, including about 600 at its Burnett Plaza headquarters in downtown Fort Worth. Add in more than 4,000 autoworkers at the assembly plant, where GM announced a $1.4 billion expansion and renovation this year, and GM employs some 8,000 people in Tarrant County.

Recently, Berce, 62, sat down with the Star-Telegram to discuss the company’s evolution. Here are excerpts from the interview.

On how the company has changed since being bought by General Motors

“GM wasn’t a big cultural change; it was a strategic change. We went from being subprime U.S.-focused AmeriCredit to being global and doing all the products any captive finance company would be doing.

“GM has let us operate fairly autonomously. … The management is largely intact. We’ve added expertise in areas like floor plan finance that we didn’t have, but the core team from five years ago is completely intact.”

On how rising interest rates could affect auto sales and loans

“What typically happens in auto finance, when the Fed raises rates, we’ll price our loans higher to the consumer. What that does for manufacturer, it decreases affordability; the customer’s car payment will be a bit higher. So the rising rates will affect the manufacturer more than us. They’ll have to decide whether spend more on incentives or tolerate less sales or less transaction price. … We expect orderly rate increases for the next two years.”

On how AmeriCredit survived during the financial crisis

“Most subprime auto companies fail not because of so-called credit costs or higher defaults. They fail because of a lack of capital and liquidity. In a recession, capital access for independent companies — whether it’s mortgage, credit card companies, subprime — just dries up.

“We were no diferent. Capital dried up for us. But we at AmeriCredit had been through several cycles since the early ’90s when we started. So we reacted pretty quickly to what we saw were declining credit market conditions and rising defaults. As early as September ’07, we started to scale back our business with the idea of preserving liquidity. And we aggressively scaled back our business all the way through the trough of the recession in the spring of ’09.

“We laid off people, shut down operations. [The company cut about half its workforce.] We basically took our new loans, the amount of new loans we do in a month, from $1 billion in mid-’07 to a low of $50 million in June of ’09 because we didn’t have the capital. But if you’re decreasing your new loan activity, you’re still collecting what you did six months and a year ago. So that provided us the liquidity to survive.”

On the difference between the subprime mortgage market, which collapsed, and subprime auto and if it poses the same risks

“The business is not without risk. The subprime mortgage market went from $100 billion a year volume in year 2000 to over a trillion right before the crisis. So there truly was a bubble. Whereas subprime auto never had that meteoric rise and fall. … So for subprime [mortgages], there was stated-income loans; they didn’t do any verification. The originator of the loans was able to cash out of them and then sell it to a bank who did the securitization. So there wasn’t any accountability for the loan, if you will. And all the securitizations were done with the premise that home values were going to keep going up.

“So the big difference, in subprime auto there wasn’t any default in the securitizations in the crisis because there wasn’t an asset bubble. Cars don’t increase in value. Verification was done. And when AmerCredit made a loan, if the loan went bad, we’re the ones who suffered, not somebody downstream who ended up owning the loan.”

On the status of delinquencies in the subprime area

“It’s historically low. It’s lower than what it was in ’07. But it is normalizing. It’s gradually reverting back to historically levels. Year over year, defaults and delinquencies in subprime are higher, but they’re still at absolutely low levels historically.”

On the biggest challenge moving forward

“Just executing the significant growth we’re undergoing. We have to make sure we deliver a great customer experience because our mission is to help GM sell more cars and make money at our level. But the only way we’re going to help GM sell more cars is to provide their customers with a great experience.”

This story was originally published December 23, 2015 at 1:22 PM with the headline "GM puts the pedal to the metal at Fort Worth finance unit."