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A key financing partnership for Ally Financial Inc. could be at risk as part of Chrysler Group LLC's review of its lending programs.
February 29 -
KBW report says Wells would be the frontrunner for Ally's profitable auto financing division, which could fetch as much as $68 billion in a sale.
February 21 -
The government-owned Ally Financial has issued an offering book on Residential Capital Corp. in the hope that it can finally unload its money-losing mortgage division and take the rest of the company public, according to investment bankers familiar with the matter.
February 9 -
Ally Financial is "on par" with any top-tier financial company — as long as analysts ignore the massive mortgage problems that made the lender lose $250 million in the fourth quarter, CEO Michael Carpenter says.
February 2
NEW YORK — General Motors Co. said Thursday it signed a deal to offer dealer and consumer financing through Wells Fargo & Co. in GM's U.S. Western region, another potential threat for Ally Financial Inc.
Ally, formerly GMAC LLC, used to be the in-house financing arm for GM and is currently the largest provider of loans for the auto maker's customers. It has a partnership to provide incentive loans to GM customers that expires next year.
GM's "long-term partnership" with Wells Fargo will include incentivized loan programs and non-incentive retail loans for customers, floor-plan and other financing for dealers, treasury services and insurance, GM said.
The deal will "fuel growth in our auto finance business, an area in which we are looking to expand," Tom Wolfe, head of Wells Fargo consumer credit solutions, said in a press release. The deal pertains to Oregon, Washington, California and other Western states.
GM said the deal will complement its "extensive relationship with Ally," a leasing program with U.S. Bancorp, and its in-house offerings through GM Financial, the unit it created after acquiring subprime lender AmeriCredit Corp. in 2010.
Ally signed a deal with GM in 2006 under which the auto maker would use Ally exclusively for incentive loans and leasing to customers. The agreement was changed in 2009, giving GM the ability to offer incentive financing through other lenders starting in 2011. That agreement runs through 2013.
Under incentive loan programs, dealers can offer discounted rates on loans as a way to attract buyers.
The volume of auto loans Ally made under incentive programs through its preferred partners has shrunk in recent years, but still accounted for 36% of its new loans and leases in North America in 2011, according to its most recent annual report.
"Ally remains an important business partner to GM and its dealers," said Jim Cain, a spokesman for GM. He declined to say what GM plans to do after its existing agreement with Ally expires.
GM worked with Wells Fargo on a trial last year before deciding to form a more official agreement, Cain said.
A spokeswoman for San Francisco-based Wells Fargo declined to comment on the length of the agreement.
Ally "remains the leading finance provider for GM vehicle sales," a spokeswoman for the Detroit-based lender said.
"We value the business from GM and their dealers," she said, adding that Ally has been "growing and diversifying our business over time and supporting a broader network of products and brands."
GM in 2006 sold a majority stake in Ally Financial, which is now 74% owned by the U.S. government after taking a bailout during the financial crisis.
News of Wells Fargo's deal with GM comes as the fate of another of Ally's preferred lending partnerships is in question.
Chrysler Group LLC has been talking to several banks about forming a new financing venture, the Wall Street Journal reported last month.
Ally has an agreement with Chrysler that extends through April 30, 2013, to provide financing to the auto maker's dealers in the U.S., Canada, Mexico and other regions to buy inventory. Chrysler also is required to reserve for Ally a certain portion of incentivized financing to car buyers.
A spokesman for Chrysler declined to comment Wednesday about its contract with Ally but said it is talking to a number of financial institutions regarding different options.
Michael Carpenter, chief executive of Ally, said last month that the company has seen increased competition as more banks have turned to auto lending for growth.
"Every bank on the face of the earth is basically saying, "OK, we hate mortgages, we don't like credit cards very much, we like the consumer. What can we do? Answer: Auto," Carpenter said during an earnings conference call. "That's good news and bad news from our point of view."
Ally is holding up well against competition and has a "market focus or dealer focus that is unparalleled," Carpenter said.
It's clear that GM and Chrysler are trying to create a more "competitive landscape," said Kirk Ludtke, a managing director with CRT Capital Group LLC.
Despite the increased competition, "Ally's got a very well established franchise" with dealers, Ludtke said.
