LANSING, Mich.- Credit unions throughout the Midwest, many of which are sponsored by automakers, have unveiled a plan to help General Motors by providing as much as $10 billion in low-rate loans to purchasers of GM brands.
In addition, General Motors will be making a pool of advertising funds available to promote the credit union financing.
The partnership with the Michigan CU League and CUNA, dubbed "Invest in America," offers new or current members of 1,295 credit unions in Michigan, Ohio, Illinois, and Indiana access to lower loan rates, suggested at 5.4%, in addition to a discount of approximately 4.5% on the manufacturer's suggested retail price. Organizers hope to expand the plan nationwide and to other U.S. car manufacturers.
Ford and Chrysler have been invited to join, and there's a "very good chance" both may participate in 2009, MCUL President David Adams told Credit Union Journal. "We hate to see the credit crisis, and we hate to see the strain on automaker sales. But the silver lining is that this is an opportunity for credit unions because they have been the good, responsible and prudent players, and have lots of money to lend. GM has a high level of interest in making this a national program. But it hinges on-I can't stress strongly enough-credit unions seizing this opportunity to promote the program to their members. If we can generate incremental sales for GM and the other Big 3 that might participate, they'll want to extend this program and will see credit unions as a great partner."
With $23-billion in liquid assets and 12 million members in the four-state region, credit unions are in an excellent position to deliver the program, suggested Adams. Credit unions are "stronger than they have even been" in terms of capital ratios and liquidity, and rates are more than a percentage point below banks on average, he added. "In a tough economy in which consumers are watching their pocketbooks, this program is meaningful."
Currently a pilot, Invest in America is set to run through June 30, 2009. Members receive GM's Supplier for Friends discount on purchases of eligible new Buick, Cadillac, Hummer, Saab, Chevrolet, GMC, Saturn, and Pontiac cars and trucks. Through Jan. 5, members also receive an additional $250 cash bonus. Invest in America pricing can be combined in most cases with other incentives. For example, buyers could save more than $10,000 on some models of the 2008 Cadillac Escalade sport utility vehicle.
"The automobile industry runs on credit and we've been hit hard," reminded Mark LaNeve, VP of GM North America sales, service and marketing, who acknowledged that Invest in America is a partnership developed before GMAC's failed effort to become a bank and will not be affected if its financing arm "fully recovers... Having access to credit at attractive and competitive rates provides us with a huge benefit. We believe this partnership is a great opportunity for both our existing customers and hopefully a lot of new ones."
Adams feels the growth opportunity extends to credit unions, as well. "It certainly adds value to being a credit union member," he said. "We have a website that facilitates access to the GM discount and shares the benefits of being a credit union member."
Credit union members and non-members can find details on the discounts at www.lovemycreditunion.org, and obtain an authorization number to take to any GM dealership. Those who are not CU members receive information on how to join a local credit union and where to find one.
Members do not have to take credit union financing to receive the discount, and interest rates are set by each CU. Adams anticipates some credit unions will become "very aggressive," while others will rely on their current low rates. GM is not subsidizing credit union financing.
Whether credit unions choose to cut auto loan rates or not, Adams contends that credit unions will compete favorably against manufacturers' financing. "The captive finance companies have always had the ability to subsidize their rates. But credit unions have served 90-million consumers in the U.S. and the message has always been to negotiate your best price and then go to the credit union for financing and you will come out ahead. That will continue to be the message."
LaNeve suggested credit unions will not be competing anytime soon with any 0% APR deals from GMAC. "We are not currently offering subvented APR programs," he said. "And moving forward, I don't think the industry will be as heavily invested in subvented APR or subvented leasing. I think we have had a transformational shift in the industry. The Japanese brands are the ones out now with 0%. But you really have to look at the kind of incentive offer we have, the price of the vehicle, and the good rate from the credit unions. We can compete favorably against 0%."
To compete on the marketing side, CUs will receive assistance from GM. Adams explained as part of the agreement with the carmaker, an "advertising pool" of money will be created from the program's sales to be used by credit unions.
Invest in America is headed by the four state trade associations and CUNA. CUcorp, a wholly-owned subsidiary of the Michigan CU League, is coordinating the program with GM and is in talks with Chrysler and Ford. Adams believes the chance for the program to extend beyond June is good.
"It's better to be lucky than good," Adams kidded about the program's timing and subsequent appeal to the automakers. The Michigan league approached GM three months ago with the proposal. "We certainly felt a little responsibility to do something with the Big 3's headquarters each within an hour's drive of our league's office.
For More Information
www.lovemycreditunion.orgwww.cuna.org
www.mcul.org
www.cucorp.com
www.gm.com
www.chrysler.com www.fordvehicles.com
