Imperial Credit Will Close Auto Loan Unit
Imperial Credit Industries Inc. said Friday that it will close its Automotive Marketing Network Inc. unit, which makes auto loans to high-risk borrowers, because it was operating at a loss.
The Torrance-based commercial and consumer lender announced the move as it reported second-quarter operating profit of $16.3 million, or 40 cents a diluted share, up 16% from $14.1 million, or 35 cents, a year ago.
The company said it will take a one-time charge of an unspecified amount in the third quarter as a result of closing the unit.
The news sent Imperial’s shares falling in heavy trading on Nasdaq, to close at $20.75, down $2.06.
Phoenix-based Ugly Duckling Corp., a sub-prime auto lender, and its Cygnet Financial Services unit will collect and process Automotive Marketing’s outstanding loans, Imperial said.
“We didn’t see an immediate upturn in the industry where we were confident we could earn adequate returns on our investment any time in the near term,” Chairman H. Wayne Snavely said. “It’s been a drag on our earnings.”
The Tulsa, Okla.-based unit’s 200 employees will be offered jobs elsewhere in the company, Snavely said. The unit accounts for 22% of the company’s employees. Imperial Credit bought Automotive Marketing in March 1997.
Auto lenders have had financial difficulties this year, and some finance companies have stopped making high-risk auto loans. Money Store Inc., which last month was bought by First Union Corp., stopped making the loans earlier this year because of “concerns” about the business. Reliance Acceptance Group Inc., another auto lender, filed for Chapter 11 bankruptcy protection in February.
