Bouncing Back from Lean Times, AmeriCredit Shows Growth

FORT WORTH, Texas (July 3, 2006) -- After making some tough decisions in 2003 and trimming their portfolio, AmeriCredit executives promised to slowly build their business back up. As of 2006, executives said they are witnessing the fruition of their efforts through an expansion of dealer relationships, an acquisition to increase the spectrum of credit financed, their return to Canada and more.

When the company came under hard times around the turn of the century, reporting financial results in the red, executives acted quickly to nip this trend in the bud. They trimmed the number of dealers they did business with and reduced the size of their portfolio to better match the market at that time, cut operational expenses and more. After making these moves, company executives promised dealers that as soon as feasible, they would re-establish relationships and turn their attention back to growing the business.

"We downsized around 2003," according to John Hoffmann, vice president of public relations and communication. "But now that we're stabilized, we're slowly growing and expanding the company again."

Back when the company first started seeing the fruits of its labor, Clifton Morris, then chairman and chief executive officer, said, "During 2003, you'll recall we made some tough decisions. We took steps to cut our loan volume, reduce our operating expenses and change our corporate leadership -- all to help us reach two vital goals: preserve and strengthen liquidity and improve credit. ... Ultimately, we finished the calendar year 2003 in much better shape than we started it."

At that time, company executives explained to dealers and investors they would take a deliberate, measured approach to growth going forward rather than expand rapidly as they had in the past.

More specifically, executives told dealers and investors that they may select to grow loan volumes by as much as 25 percent in some years, or they may keep their portfolio flat in other years, depending on economic factors.

"We're committed to growing the company over time 10 to 15 percent per year," Hoffmann told AuSM late last week. "We may possibly even accelerate to 25 percent, or not grow at all depending on economic conditions. We've stuck to this plan for the better part of two years."

Just recently, the company has moved forward, renewing its commitment to developing more relationships with dealers, including independents and franchised.

"Historically, less than 5 percent of our business has been with independent dealers, and we hope to add more," Hoffman said. "We also plan to add more franchised dealers."

Moreover, the company just recently re-entered the Canadian market. To increase the size of its portfolio, the company also recently acquired Bay View Acceptance Corp., to offer indirect financing to near-prime consumers. While in the past the company has focused more on the subprime market, through Bay View, it can expand the spectrum of consumer credit it finances.

"Bay View Acceptance is less than 10 percent of our business," Hoffmann pointed out last week. "It is a small, incremental addition to increase our spectrum a little more. We're looking at more near-prime deals. We're doing this for two reasons: To offer a broader range of product to dealers, and secondly, it reduces the volatility of our portfolio (credit losses)."

According to company executives, other possibilities for expansion remain on the horizon, such as direct-to-consumer loans, more acquisitions, introducing other products and more.

"Anything and everything is on the table," Hoffmann noted. "We plan to be very select and very careful about any growth or expansion that we do. We're considering direct-to-consumer loans, but our core business is being an indirect subprime lender. That will remain our core business. We're not looking to flip our business model over tomorrow. Any additional expansion plans will all be complementary to what we already do."

Hoffmann also said that acquisitions are no more or less on the company's radar than they have been over the last few years.

"It's real exciting going back to dealers and telling them we're expanding," he continued. "Our relationships with auto dealers in the U.S. and Canada are the heart of our business. We have hundreds of dealer relationships in the U.S. and Canada. We work closely with dealers when times are good and bad. Back when we restructured, we explained what was going on to dealers and why. They responded, 'When you're ready to do business again, let us know.'

"Their reception (to increasing our dealer relationships) and expansion has been overwhelmingly positive," he added. "We also have a great team in Canada. It's exciting to see them rebuild from the ground up. We're generating a lot of enthusiasm, and that is what our business is all about -- establishing relationships with auto dealers."

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