Fox's Stuart Varney Whopper: GM "Can't Exit From Bankruptcy"

Blog ››› ››› ZACHARY PLEAT

Fox Business host Stuart Varney is stoking fears about subprime lending to demonize General Motors while falsely saying the company is still in bankruptcy. In fact, GM exited bankruptcy protection in July 2009 and its subprime loan sales are fully in line with industry standards.

As Reuters reported in July 2009, GM emerged from bankruptcy protection in a mere 40 days, "far more quickly than most industry watchers had expected":

A new General Motors emerged from bankruptcy protection on Friday -- far more quickly than most industry watchers had expected -- as a leaner automaker pledging to win back American consumers and pay back taxpayers.

A whirlwind 40-day bankruptcy for GM concluded with the closing of a deal that sold key operations to a new company majority-owned by the U.S. Treasury.

The development, which follows a similar fast-track reorganization of Chrysler, represented a victory for the Obama administration and its commitment to save jobs and prevent a liquidation of the largest U.S. automaker.

The New York Times reported in May, GM posted its ninth consecutive profitable quarter that month. And the federal government, which owned 60 percent of the company following bankruptcy proceedings, has a 26-percent share in the company today.

Varney supported his false assertion by claiming that GM "is in crisis" because 93 percent of their car loans are made to buyers who have less-than-stellar financial records. But a look at the facts shows how misleading Varney's claim is without context.

During the first quarter of this year, it is true that 93 percent of auto loans financed through GM Financial went to subprime lenders -- but GM Financial accounts for only about 8 percent of GM's financing. Moreover, subprime loans were just 8.2 percent of total sales for GM, compared to the industry average of 6 percent. The industry standard compared to an average of 6 percent throughout the industry. On July 23, The Detroit News reported on how Chrysler is increasing subprime lending to spur growth:

"Chrysler opening themselves up to this market has definitely helped them grow sales," said Jessica Caldwell of "It is a sector of the market that has had a hard time buying a new vehicle and has been priced out of the market for the past few years."

When it comes to subprime sales, all of Chrysler's brands are ahead of the industry average. Dodge has the most subprime customers; about one-in-five of its customers are getting loans with interest rates above 10 percent.

But Edmunds CEO Jeremy Anwyl said that does not mean Dodge is becoming a brand for deadbeats. He said many middle-class consumers with good jobs now fall into that category, thanks to the recent recession.

Moreover, the risk associated with these types of loans has reportedly decreased dramatically. From the Associated Press:

[B]oth banks and consumers have lowered their debts, meaning even subprime loans are less risky because they're less likely to be in debt and unable to pay. For example, just 0.57 percent of auto loans were 60 days delinquent in the first quarter of this year, compared with 0.78 percent in the first quarter of 2009. Experian won't release second quarter data until next month, but analysts say the trend will hold as long as interest rates stay low.

"Consumer spending is still very conservative. People aren't going hog wild like they did before the recession," said Lacey Plache, chief economist for the auto information site

Posted In
Fox News Channel
Stuart Varney
America's Newsroom
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