Auto Finance News’ inaugural Executive of the Year 2019
Earlier this year, Ally Financial’s illuminated purple logos and iridescent lights bathed the National Automobile Dealers Association showroom floor with a glow that stood out from the myriad of booths touting products and services to promote dealership success.
In a sea of dealers, Ally’s presence was calm, friendly and inviting. Company executives looked comfortable holding meetings on cream-colored couches and huddling up with dealers to discuss Ally’s latest offerings and enhancements.
Five seconds into meeting Doug Timmerman, it’s no surprise he’s at the helm of Ally Financial’s auto lending business. Despite his towering stature, which casts a shadow over almost anyone he meets, his soft temperament immediately puts people at ease and makes them feel like equals.
Sturdy, hard-working and reliable — Timmerman’s essence — is precisely what consumers seek in their vehicles, and that natural reliability serves as the solid foundation of dealer relationships that have set Ally’s success in motion.
In fact, Timmerman’s ability to focus on the communal needs of Ally’s dealer network has made way for the many products and partnerships that keep the all-star lender at the head of the pack. With an $80 billion — and counting — auto portfolio, Ally has a seat at the table with the nation’s largest captive financiers, including Toyota Financial Services, GM Financial, and Ford Motor Credit. What keeps Ally at the top is a robust portfolio of products and partnerships — all cultivated through Timmerman’s ability to connect with people.
“We’re ultimately in the relationship business,” Timmerman said with a soft, southern drawl so comforting it makes the nerves of meeting someone new flutter away. “Between the people [and dealers] we work with, there are so many stories that tie back to the American Dream. People come from very little and become very successful, and seeing others’ success is personally rewarding.”
Timmerman refers to Ally’s dealers as “we” — as if Timmerman, Ally, and the dealership are one entity.
Syncing with dealers’ wants and needs plays into Ally’s company culture, and Timmerman’s demeanor goes from airy to firm when he says that culture matters most. “To get the culture right, you attract and retain the very best people,” he said. “When you get culture and people right, you’ll get the operational results right, which, in turn, will drive the financial returns.”
Since Timmerman took the helm in the spring of 2018, Ally has grown its dealer network every quarter. At last count, the dealer base was up to 18,200, in part because of Timmerman’s personal connections.
As if overseeing a team of 6,000 employees weren’t enough, Timmerman makes it a point to have personal relationships with Ally’s dealer partners. “I’ve been involved [with dealers] during a time when things were difficult and challenging,” he said. “To work with those dealers and get them through the tough times and subsequently help them become very successful — I’m fortunate to have those experiences and opportunities.”
Arguably, Ally’s breadth of dealer products — from its SmartAuction platform to F&I, consulting, dealer training, and a rewards program — gives the lender a competitive edge. The SmartAuction platform for remarketing and repossession, for one, serves as the basis for a new partnership coming up “shortly,” Timmerman revealed. “[The alliance] includes a private-label part of the relationship, and we are investing heavily in technology in a way that SmartAuction can [provide] private-label [services] for large fleet customers,” he added.
Additionally, Ally is one of few banks to offer leasing; its portfolio totaled $8.7 billion as of Sept. 30. “The challenge [with leasing] is you can really only compete in the soft spots of the OEMs and captives,” Timmerman said. To that end, Ally leverages the used-car business — a common soft spot for captives.
In fact, Ally broke a company record in the second quarter when used car loan originations hit $5.24 billion. “We ‘price-in’ expected depreciation rates,” Timmerman said. “We expect used-vehicle valuations to soften in 2020 to 2021 about 6% and 5%, respectively, and we input that trend into our pricing.”
Originations continue to climb, as well, increasing 14% year over year to $9.3 billion of auto loans and leases in the third quarter. Ally’s originations were decisioned from a record 3.2 million loan applications, an 11% increase year over year.
The Detroit-based financier has made strides this year from a capital markets perspective, too. In August, Ally’s long-term default rating reached investment-grade status after an upgrade by Fitch Ratings, thanks to a boost in profitability stemming from increased used-car originations. The upgrade is a plus for Ally since investment-grade paper is in higher demand by investors. This year, Ally has securitized $3.4 billion of prime auto loan receivables in three transactions, according to S&P Global Ratings.
Timmerman’s natural appreciation for the ties that bind a community is at the center of his upbringing — and his success. He was born and raised in a small town in Nebraska and spent summers working sunup to sundown on a farm. From 4:30 a.m. to 8:00 p.m. he would bale hay, tackle corn and mend fences.
“I certainly gained an appreciation for hard work early on,” he said, noting that his days spent working on a farm drove the ambition that led him to earn a bachelor’s degree in finance and mathematics and a master’s degree in business administration from the University of Nebraska. “I was always better at counting than spelling,” he said with a nostalgic chuckle.
Growing up, Timmerman thought he’d become a stockbroker until one of his professors convinced him to interview with General Motors Acceptance Corp. “I interviewed with GMAC, and they sold me on their career potential,” he said.
Fast-forward 33 years and Timmerman has built his entire career at GMAC and successor company Ally. Since joining GMAC in 1986, Timmerman has held leadership roles across the auto finance and insurance businesses. As vice president of auto finance for the southeast region in Atlanta, he was responsible for sales, risk management and portfolio management for more than 4,000 dealer relationships across 11 states. In 2014, he was promoted to president of Ally Insurance.
“I’ve done every job in the business at least once, maybe even a couple of times,” Timmerman said. “At times I didn’t get it quite right the first time, but the [experience] is a huge advantage.”
Timmerman attributes part of his success as president of Ally’s auto business to these job rotations — the 12 markets he bounced around in and the myriad of roles he held before finally settling in Ally’s Atlanta office. “Moving around a lot, you get exposed to different leadership styles, management styles and markets,” he said. “Every [job] change is like a clean slate. You need to prove yourself and develop new relationships and integrate yourself into an existing team. For me, I’ve always liked the people interaction.”
Timmerman’s leadership style is a birthright he inherited from his father, Laverne Timmerman, who served as mayor of Papillion, Neb., in the early 1960s. Watching his father connect so well with people sparked Timmerman’s drive to do the same at Ally, a company with nearly three times as many employees as Papillion’s population at the time.
A people business
In light of Ally’s success with dealers, Timmerman has hitched his wagon to a strategy more powerful than fancy technology or innovation: word of mouth.
“Dealers tell me the reason why they do business with us is because of the people they work with every day,” Timmerman said. “[Ally’s employees] know the car business, they’re focused on what’s most important to the dealer and they have the dealers’ interests at heart. Many relationships that [Ally’s] people have with our customers span decades and generations.”
Further, Ally enhances its value proposition to dealers by providing profit comparisons, by lender, for every retail vehicle, an analysis Ally generates using in-house technology. Ally also receives an “enormous amount” of proprietary intel from SmartAuction that provides unique insight relative to depreciation curves and residual values, Timmerman said. “Overall, whether [the dealer] is looking to buy or sell a vehicle — we have a very efficient and effective way of doing business,” he explained.
“With SmartAuction, we consistently prove that we not only can save on the costs associated with remarketing — including transportation and reconditioning — but we’re able to get higher prices on the vehicle sold,” he said. “Customers trust the cars that we’re selling, and that’s a big part of dealers being able to fetch those higher prices.”
Yet, innovation is part of Timmerman’s business strategy. Ally drives digital initiatives through its partnership with Carvana, an online shopping portal that leverages Ally’s products and services, including consumer lending, floorplan lending, SmartAuction and F&I products. Moreover, Timmerman’s ability to cultivate a partnership with Carvana was started via a relationship with DriveTime. “Relative to Carvana, we’re actually more similar than different,” he said.
Ally’s relationship with Carvana started with a $350 million secured line of credit in 2015. “What began as a small lending facility evolved and continued to grow, along with the size of the commitments and number of touchpoints,” said Mike McKeever, vice president of capital markets at Carvana. “Doug Timmerman has been essential in managing the growth of our relationship, and we look forward to continuing to build on that.”
At last count, Ally’s investment in the online retailer had grown to $2.3 billion. For its part, Carvana has reached a $3.9 billion market capitalization, operating in 146 markets and generating $1.1 billion of revenue in the third quarter.
As with any business, some initiatives fall short. In 2016, Ally’s then partnership with peer-to-peer marketplace Beepi was halted after the startup shuttered operations. Similarly, last year Ally scrapped functionality in its direct lending platform that allowed consumers to get preapproved for specific vehicles within dealers’ inventories.
Yet, setbacks won’t stop Ally, especially with Timmerman at the helm. “Everything starts with setting the right priorities,” he said. “We have reinforced our priorities towards the core business since I came into this role, which means focusing on our strengths and core competencies, as well as making sure that we’re working on things that are big enough to matter and produce creative returns. Self-awareness is a part of that equation.”
“Don’t get caught in the hype,” Timmerman said, reflecting on how lessons learned from hard times create an important aspect of company culture: gratitude and humility.
“We’re fortunate in the fact that because of our size and position in the marketplace, we don’t have to be first mover on everything,” he said. “Sometimes it makes sense to be first follower.”
2020 and beyond
Heavy investments in technology are a prime focus for Timmerman heading into 2020. The plan is to leverage technology to “dramatically improve” the customer experience with a project slated for release “later this year,” Timmerman said without revealing details.
“We’re also developing technology that positions us to be the partner of choice for large fleet accounts,” he said, noting that the lender “feeds off the positive reactions of its fintech and business partners.”
To that end, Timmerman makes it a point to ensure that Ally’s priorities mirror market trends. “Strategically, we try to align [our partners] with what we think best moves with the market,” Timmerman explained. “What we found is when you get involved with things outside of your strengths, you can get distracted really quickly and you’re not optimizing your resources and opportunities.”
Timmerman sees opportunities leveraging Ally’s data and analytics for consumer underwriting and collections. “Digital interfaces for our dealers relative to contract process and perfecting the use of text and other means relative to collections is a priority,” he said. “Again, very importantly, these priorities always tie back to our core business.”
Though Timmerman is ambitious about change and evolving the business, he is also grounded in the belief that when something isn’t broken, there’s no need to fix it.
“I’m fortunate to work with a great team,” he said. “Everything we’ve accomplished [in 2019] is a function of how well [the team] has embraced our priorities and how hard they’ve worked and how well they’ve executed.”
Like a proud father, Timmerman explains what the future holds for Ally’s business. “We’ve had a great 2019, and as we think about 2020 and beyond — we’re optimistic for continued greatness.”
Editor’s note: This article originally appeared in the December issue of Auto Finance News, available now.