
General Motors has been generating plenty of attention for its plans to shift to battery-electric vehicle production; however, the auto company has also been looking to get back into some old businesses too, namely banking.
It’s an oversimplification, but the Wall Street Journal reported today that GM’s captive financing unit, General Motors Financial Company Inc. is seeking to apply for a banking charter. The move would allow the company to accept deposits — like a bank. The move is part of a strategy allowing it to form an industrial loan company.
The specialized charter gives a company the ability to own a commercial firm and banks — typically a no-no with a traditional banking license, the newspaper noted. GM has done this before with its GMAC unit, which not only offered auto loans, but also home mortgages and other types of lending options.
(GM financial arm strengthens loan portfolio.)

That could occur as early as next month, according to sources cited by the WSJ. The company has been nosing around the subject with federal and state regulators for several months. The Federal Deposit Insurance Corp. and Utah Department of Financial Institutions are reportedly on board with this.
GMAC nearly failed during the Great Recession in 2008 due to subprime mortgages. The government bailed the unit it out and it was renamed Ally Financial, and GM eventually sold its stake in 2013. Ally Financial currently offers auto loans for several automakers, including Fiat Chrysler and Hyundai, as well as offering online banking resources.
According to WSJ sources, this would not be round two of GMAC, rather the deposits would be used to help with the automotive loan business. It would essentially act as a low-cost form of capital for those auto loans. Currently, the unit has to issue debt in order to provide financing for its customers. It’s possible the newly chartered unit would offer high-yield savings accounts as well as other deposit-based accounts to consumers.
(Treasury adds capital to GMAC Financial Services.)
GM isn’t alone in offering financing to potential buyers. In fact, it’s often part of the marketing push to draw customers into dealerships by advertising low rates on new car loans and leases. It gives dealers a chance to secure sales to buyers with less-than-ideal credit scores.

In the case of GM Financial, it’s added some green to the company’s bottom line. It generated $14.5 billion in 2019, accounting for 10.6% of GM’s overall revenue, WSJ noted. In 2010, the unit’s revenue was less than 1% of auto company’s revenue while it rose to 4.2% in 2015.
Getting the industrial loan company structure in place wouldn’t make it unique in the auto industry, the newspaper noted. Toyota Motor Co. and BMW AG employ similar units to not only offer auto financing, but home mortgages and credit cards. What is different is that few companies have attempted to get back into that business since the 2008 banking collapse.