GM Financial chief bullish on strength of US consumer

Dan Berce, president and CEO of GM Financial, was optimistic about the state of the US consumer during a CEO roundtable discussion on day two of SFIG Vegas, while also sharing some views on how the market should be thinking about a recession in the near term.

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Keeping with a running theme at the conference, Berce said he was seeing all the right signals in the consumer sector, even with the economic cycle at its peak.

“I’ve been at this for 28 years, with Americredit and GM Financial, and 2018 was probably the most solid consumer credit I’ve ever seen from every measure,” Berce said in response to questions about rising subprime auto delinquencies and the health of the consumer.

Berce pointed to the seasonal nature of subprime delinquencies in particular. Subprime delinquencies tend to rise in the fall, but come back to normal every spring. In the past, alarms bells have always gone on and off through each seasonal cycle.

“I don’t see consumer credit breaking any time soon,” Berce said. “We will have a recession, I don’t know if that’s in 2020 or 2021…but I don’t see any consumer credit bump at least in 2019.”

When a recession does arrive, Berce said the market should focus on liquidity rather than credit. In June 2007, before the company was acquired by GM Financial, Americredit was able to originated roughly $1bn worth of loans. At the outset of the crisis, that number declined to $50m. Though the company went through a period of downsizing, especially in the origination and funding departments, Americredit was able to survive by focusing on maintaining cash flow, the CEO said. The company was bought by GM Financial in 2010.

“Even though we we’re shrinking, [we said] as long as we cash flow, we won’t go out of business,” said Berce.

On the roundtable, Berce also talked about the GM’s “zero-zero-zero” initiative that aims for zero crashes, emissions and congestions.

“That’s a fantastic vision,” Berce said. “It’s clearly aspirational, but is serving as the North Star in terms of where to take the company.”

Electric cars and ride-sharing are two major components of this sustainability effort. GM has a shared vehicle fleet called Maven, which operates in 10 markets in the US and Canada. Like other ride-sharing services, GM’s Maven allows customers to hail a vehicle on their phone at any time of day. GM Financial is the owner and financer of the fleet purchased and all the vehicles are then leased to Maven.

The GM cruise unit is also gearing up to have automated fleet operations in 2019, Berce said. The operation will likely take off in a “very geo-fenced area,” such as densely populated cities, but mainstream adoption is many years off, he added. Automated cars also have the potential to replace ride-hailing apps and cut down costs for companies by taking the driver out of the equation.