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Ally Financial, the second-largest remaining investment by the Treasury's bailout fund, will repay the government by 2014 on the strength of its auto-finance business, its chief executive officer said.
Ally can make a significant payment this year toward the $14.6 billion still outstanding from the Treasury's Troubled Asset Relief Program, CEO Michael Carpenter said in a Feb. 9 interview. Ally in 2012 financed the most new- and used-vehicle sales in the U.S. for the second consecutive year.
"We are 100 percent confident that we can repay the American taxpayer completely," Carpenter, 65, said at the National Automobile Dealers Association's convention in Orlando, Florida. "Whether that's this year or next year, I don't know. But it's in that time frame."
Ally is selling assets outside the U.S. to narrow the company's focus to autos and its online retail bank while fending off claims tied to its Residential Capital unit, which went bankrupt because of losses on subprime home mortgages. Ally's auto unit has expanded its used, leasing and subprime financing offerings ahead of expirations this year of agreements that guarantee business from General Motors Co. and Chrysler Group LLC.
GM Financial, the largest U.S. automaker's credit arm, agreed in November to purchase Ally's international auto-finance businesses in Europe, Latin America and China for $4.2 billion. In October, Ally agreed to sell its Canadian operations to Royal Bank of Canada, receiving $4.1 billion, and reached a deal to sell its Mexican insurance business to Ace Ltd. for $865 million.
Once Detroit-based Ally completes those deals, U.S. auto financing will be "basically our only business," Carpenter said Feb 9.
"Our customers don't have to worry that we'll wake up on Monday morning and decide we don't think this is as attractive as we used to and back away," he said.
Banks including Wells Fargo & Co. have pursued auto financing after consumer debt within the industry performed better than most other categories during the financial crisis. U.S. sales of cars and light trucks climbed by at least 10 percent each of the last three years, according to researcher Autodata Corp.
Ally received $17.2 billion from the U.S. in a rescue that began more than four years ago. The lender, formerly known as GMAC Inc. and owned by GM until 2006, effectively became the captive finance units for GM and Chrysler, keeping credit flowing to new-vehicle buyers following the automakers' bankruptcies, said Bill Muir, Ally's president and head of its auto operations.
"For us, that was not a sustainable model," Muir said in an interview at the NADA convention. "We were dependent on what the manufacturer wants."
Used-vehicle financing and leasing were 46 percent of Ally's originations last year, up from 14 percent in 2009. Subsidized-rate loans, made to consumers at below-market rates for the automaker's marketing campaigns, have dropped to 20 percent of originations from 58 percent during that span. With so-called subvented loans, the automaker compensates the lender for the difference for the below-market rates.
"We now have morphed to our business reflecting what's important to the dealer," Muir said. "We've trended toward a much more balanced group of business, which by the way has better margins."
Ally's agreement with Auburn Hills, Michigan-based Chrysler that guarantees a minimum percentage of its vehicles sold with subvented loans, expires at the end of April.
Chrysler, majority owned by Fiat SpA, last week reached an agreement with Banco Santander SA, Spain's biggest bank, to replace its deal with Ally. Santander Consumer USA Inc. will form Chrysler Capital, which begins operations May 1. GM's agreement with Ally ends at the end of this year.
