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GM Financial Added Value to Its Business in 2017

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Jan. 3 2018, Updated 10:31 a.m. ET

GM Financial

General Motors (GM) manufactures and sells a wide variety of vehicles ranging from small cars to large trucks. The majority of its portfolio is targeted to the average consumer.

To encourage more consumers to purchase its vehicles, the company provides automotive financing services through General Motors Financial Company (or GM Financial). In this part, we’ll see how GM Financial has performed in fiscal 2017 so far.

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Performance in 2017

In the first three quarters of fiscal 2017, GM Financial (or GMF) reported total revenues of $8.9 billion, up 39.0% from $6.4 billion in revenues in 9M16. During this period, GM Financial’s profitability also rose YoY (year-over-year).

The financial arm of the company reported EBIT (earnings before interest and taxes) of $900.0 million compared to $700.0 million in the first three quarters of 2016.

General Motors Financial’s strong performance can be attributed to its retail sales growth in the US along with higher sales penetration levels.

Sales penetration

Despite GM Financial Company’s higher revenues and flat profitability, its sales penetration level rose in all key markets. In first three quarters of 2017, its sales penetration in term of percentage of GM’s total retail sales fell to 43% in 2017 compared to 37% in 2016.

Similarly, GMF’s sales penetration in North America and Latin America rose to 42% and 59%, respectively, in the first three quarters of 2017. In 2016, its penetration levels were lower at 34% and 55% in these respective markets.

Overall, GMF’s higher sales penetration and increased profits contributed positively to General Motors’ overall business in 2017.

Apart from GM, legacy auto industry players (XLY) Toyota (TM), Ford (F), and Volkswagen (VLKAY) also provide financing facilities to their customers with their own financial services arms.

Read on to the next part to find out how GM’s pension obligations look.

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