The Cry Against G.M.A.C.

Every year, the small auto finance companies that make up the American Finance Conference kick off their annual convention with a blast against their special foe: giant General Motors Acceptance Corp., the sales finance subsidiary of General Motors. They kicked again last week in Washington, and with new fury. Unless G.M.A.C. is quickly curbed, complained Richard Meier, chair man of the A.F.C. executive committee, there may soon be no "independents" left. In the past five years, says Meier, the number of independent auto finance companies has shrunk from 322 to 242.

Small finance companies contend that they do not get their fair share of financing of G.M. cars for two reasons: 1) G.M. dealers are under pressure to give their accounts to G.M.A.C., which can 2) charge lower rates than the independents because G.M. uses financing as a loss leader and does not need to show a profit on it. They endorse a bill, introduced unsuccessfully by New York's Democratic Congressman Emanuel Celler in the last two Congresses, to force Ford and General Motors to get rid of their finance subsidiaries.

Pursuit of Profit. Actually, General Motors' share of the car financing market is declining. In the first nine months of this year, G.M.A.C. held only 20% of the total U.S. auto financing market, v. 22% in 1960. Moreover, G.M.A.C. has financed only 35% of the auto sales of G.M. dealers so far this year, v. 42% in 1960.

G.M.A.C. officials hotly deny the "loss leader" charge, point to their hefty $53 million earnings last year as proof that they are seriously out to make a profit. The Justice Department has never been able to make monopoly charges against G.M.A.C. stick. In 1952, after twelve years of futile efforts to persuade the courts to order General Motors to divest itself of G.M.A.C., the trustbusters had to settle for a consent decree under which G.M. promised not to force its dealers to use G.M.A.C. financing.

Friendly Bankers. Despite G.M.'s disclaimers, it is hardly a coincidence that the world's largest auto financing company is owned by the world's largest auto manufacturer. But the real competition of the small auto finance companies is from commercial bankers rather than G.M.A.C. Bankers once scorned auto loans, but since 1955 have increased their share of the car financing market from 39.5% to 49%. It takes a large finance company to be able to raise capital cheaply enough to lend it out at rates competitive with those the banks can offer. As a result, many small companies have been absorbed in mergers. A.F.C.'s Meier concedes that his own Interstate Finance Corp. of Evansville, Ind., has "taken in from 25 to 50 companies by merger" since it started 42 years ago. And even though the independents' share of car financing has dropped from 29% to 17% since 1955, they are really not doing so badly: in the same period, their total loans outstanding have risen 35% to $7.3 billion, because they have diversified into personal loans and into financing sales of trailers, boats and farm machinery.

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