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GM’s financial unit bids for Ally international businesses

An employee walks past new cars at a General Motors parking lot in Shenyang, Liaoning province August 1, 2012.

SHENG LI/REUTERS

Automaker General Motors Co. said on Monday its financial unit is among the bidders for the international operations that auto lender Ally Financial Inc. is selling.

GM Financial, along with other parties, submitted bids in July, but there was no assurance it would be successful in buying any of the operations, according to a filing by GM with the U.S. Securities and Exchange Commission. If it is, GM Financial could expand its operations materially in international markets and more than double its overall assets.

Analysts said the Ally assets could attract bids in the range of $2-billion (U.S.) to $4-billion. An Ally spokeswoman reiterated the company has received interest from about 30 different parties for the assets and said officials were "encouraged by the initial progress."

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"It's a good thing to have control of financial services companies," said Guggenheim Securities analyst Matthew Stover, who has a "neutral" rating on GM shares. "They tend to be very profitable. From an investment standpoint, they tend to be pretty good businesses and from a competitive standpoint they help you be more flexible in the [sales] market."

Ally, 74 per cent owned by the U.S. Treasury after a series of bailouts, said in May it was selling operations in Europe, Canada and Mexico in a bid to speed up repayment to U.S. taxpayers. The U.S. Treasury also owns about 26 per cent of GM.

In an earnings conference call this month, Ally chief executive officer Michael Carpenter said the lender had received offers from nearly 30 bidders and expected to complete the sales by year-end.

Ally was once the in-house lender for GM known as GMAC Financial Services but later became a separate company and was renamed. It struggled during the financial crisis when losses ballooned at its Residential Capital mortgage lending unit, which filed for bankruptcy in May.

GM established the core of its current lending subsidiary when it bought AmeriCredit Corp. in 2010.

In May, GM CEO Dan Akerson said the Detroit-based automaker was interested in buying Ally's international operations. He added that GM was probably not interested in buying Ally's U.S. operations.

According to Monday's filing, GM Financial's consolidated assets could more than double and it could incur "substantial amounts of indebtedness" if it buys Ally's assets.

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Such an expansion could have "significant impacts on its business, results of operations, liquidity and financial condition," the filing said.

"Clearly, GM may now be willing to let GM Financial get bigger after its initial strategy with the AmeriCredit acquisition to target select non-prime and lease financing markets in the United States," said Citi analyst Itay Michaeli, who has a "buy" rating on GM shares.

Mr. Michaeli added that opportunities to buy such assets do not come around too often and financial services businesses allow automakers to improve dealer relations, be more flexible with the incentives they offer consumers and better retain customers.

By selling its international operations, Ally is focusing on its U.S. auto lending business and its Internet banking operations. The ResCap bankruptcy filing aims to protect the parent company from liabilities tied to mortgages that were packaged into bonds and sold to investors during the housing boom.

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