Wells Fargo Strikes Financing Deal with GM, Challenging Ally

The agreement between General Motors and Wells Fargo to provide financing through Chevrolet, Buick, GMC and Cadillac dealers and customers has broadened to include the South Central U.S., according to a Bloomberg report today. And Wells Fargo wants more.

But will this take away business from Ally Financial? Wells Fargo and other banks are pushing deeper into a market that has been dominated by Ally.

The GM agreement allows Wells Fargo to bid on subvented loans and to provide commercial services, such as treasury or wealth management, to GM dealers.

During its 2Q12 earnings call, Ally’s CEO Michael Carpenter noted that Ally’s agreements for subvented loans for Chrysler and GM will expire in April 2013 and December 2013, respectively, but the company is “well positioned” for that time, he said, noting that GM and Chrysler retail subvented contracts comprise only 18% of its 2Q12 auto earning asset mix.

“That isn’t to say that the relationships with the OEMs aren’t important,” he said. “They no longer define us or constraining our potential.”

Carpenter explained that Ally’s competitive offerings of a variety of products puts them “head-to-head” in the marketplace among all other competitors. “We are diversified across brands, dealer brands, dealer relationships and the credit spectrum,” he said.

“Our objective in life is pretty straightforward,” Carpenter said during the Aug. 1 conference call. “It’s to continue building the auto business, to continue to build the bank, and it’s to get the U.S. government completely out of their shareowner position.”

The latter goal has been delayed by the May bankruptcy of Ally’s Residential Capital mortgage unit.

Wells Fargo is also among banks such as Santander Holdings USA Inc., GE Capital Corp., US Bancorp and JPMorgan Chase that have negotiated with Chrysler about its auto- financing needs, three people familiar with the talks said in February.

Wells Fargo extended $20.2 billion in indirect auto loans through about 11,900 dealers in 2011, according to a May presentation. The bank also provides commercial services for more than 850 dealers.