AmeriCredit started out in 1986 when Cash America pawnshop
executives Jack Daugherty, Clifton Morris and a group of investors
created the country's first used-car chain, then named UrCarco,
that eventually grew into an S&P 400 financing company.
After landing $10 million from Rainwater Management in 1991 and
restructuring, the company changed its name to AmeriCredit in
1992. The company sold off its used cars and beefed up its
lending business by teaming up with credit-scoring firm Fair Issac
to develop a credit-risk scorecard to avoid making bad loans.
The company branched out in 1996 by buying Rancho Vista Mortgage,
which became AmeriCredit Corp. of California. The Rancho
Vista purchase allowed the company to build a home equity lending
business. But three years later, it pulled the plug on its
mortgage business and began focusing on car loans. The
corporation launched an online network that allows dealers to send
loan applications to lenders, called DealerTrack, in 2001.
Looking beyond subprime
The company began a strategy in 2007 to diversify its portfolio to
become less dependent on subprime loans, as subprime defaults in
the mortgage market caused many casualties on Wall Street.
The majority of AmeriCredit's business remains in the subprime
credit range, and the fallout in the auto loan market has appeared
to be far more minimal than that in the mortgage market.
AmeriCredit's leverage has shifted upward over the past year to
reflect the decreased credit risk profile of its portfolio.
The company's leverage ratio stood at 7.7 managed receivables to
equity in June 2007. The change marks a new strategy for
AmeriCredit to redefine itself as a full-spectrum auto-finance
firm, instead of a subprime lender.
Acquisitions and expansions
In May 2006, the company purchased Bay View Acceptance Corp.,
which offers specific auto finance products, including extended
term financings and higher loan-to-value advances to customers with
prime credit bureau scores. The following year, AmeriCredit's
operating subsidiary AmeriCredit Financial Services completed its
purchase of Long Beach Acceptance Corp., which had been an auto
finance subsidiary of ACC Capital Holdings. The buy cost
AmeriCredit about $282.5 million in cash. In fiscal year
2007, AmeriCredit originated loans totaling $660 million through
the LBAC platform.
The company moved back into the Canadian market in May 2006 by
establishing AmeriCredit Financial Services of Canada in
Mississauga, Ontario. The company's underwriters operate from
Mississauga with sales reps located across the nation. The
company plans further Canadian expansion. AmeriCredit
operated in Canada from 1998 to 2003 but left due to
Running with the big dogs
The annual Fortune 1000 list of the nation's biggest companies
saved a place for AmeriCredit. The firm made Fortune's list
of the largest companies in the United States in 2008, moving up to
the No. 805 spot from No. 916 in 2007. The ranking was based
on the $2.34 billion in revenue the firm posted in 2008, up 26
percent from the previous year.