Ally Won’t be Hurt by Loss of GM Business, Analyst Says

Ally Financial Inc. should continue to be profitable in 2015, despite the news that GM Financial will soon be the exclusive provider of subvented leases for Buick and GMC dealers, according to Mark Palmer, managing director and financial analyst at BTIG.

The two companies, of course, share some history. Until 2009, Ally was known as General Motors Acceptance Corp. It was sold to investors in 2006 and renamed Ally in May 2010. In July 2010, General Motors acquired AmeriCredit, and renamed it GM Financial in October of the same year.

GM Financial recently bought Ally out of its stake in the companies’ joint finance venture in China.

Ally was not only aware that this partnership was a possibility, Palmer told Auto Finance News, but was already moving in a direction that would allow it to offset any impact. Ally Chief Executive Michael Carpenter told investors in December to not be surprised if they saw GM move towards its captive, and also pointed out that the company is not worried about losing that business, according to Palmer.

“This would be impactful, with regards to earnings, to a greater extent if Ally wasn’t already ramping up non-GM brands on new vehicle loans, which increased by 48% during the 3rd quarter,” Palmer said. “And used vehicle loans increased by 22% during that quarter, which was $3.2 billion. So if we’re talking about [losing] $900 million, it certainly appears to us that Ally will be able to more than make up for that with non-GM new vehicle loans, as well as used vehicle loans, for all brands.”

A representative from Ally confirmed with Auto Finance News, through email, that “it was anticipated that GM would continue to grow its captive and as GM’s captive has grown, Ally has continued to thrive and broaden its business, while still supporting the GM dealer network.”

GM Financial called the partnership a “natural evolution” in a statement sent to AFN, and indicated that the move is consistent with GM’s strategy to provide “transparent, competitive financing products.”

“In this role, GM Financial will be able to help our dealers maintain strong lease loyalty by enhancing the customer experience, providing simplified lease programs and a more consistent lease experience over time for both the dealer and the consumer,” GMF wrote in the statement.

“Clearly GM would like to see its captive perform well,’ Palmer said. “So this is a means through which GM can help to bolster its captive, whose success is in its best interest.”

Palmer also said that the loss of leases will not affect Ally’s 4th quarter earnings either, since the automaker’s partnership with GMF will not begin until Feb. 3.

As for Ally, the company plans to continue the growth it enjoyed in 2014, despite the increasingly competitive landscape of the auto finance market, according to Ally’s rep.

“Ally entered 2015 as a stronger company and poised to pursue opportunities and build upon our strengths,” Ally told AFN. “Ally is the leading independent auto finance provider in the marketplace with a dealer network representing many vehicle brands, and we ended 2014 with a modern-day record of about $41 billion in total originations, with our growth channel up 50% compared to 2013.”