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US Treasury Taps Former Chrysler Exec in Bid to Save Ally Financial

Gerry Greenwald to serve as new director of troubled lender.

by on Aug.16, 2012

Former Chrysler Vice Chairman Gerry Greenwald.

He played a critical role in saving Chrysler three decades ago, and now the U.S. Treasury is hoping one of the maker’s top former executives can work the same magic at struggling Ally Financial, one of the companies bailed out by the government in 2009.

A turnaround is more than academic for taxpayers.  The Treasury still owns a 70% stake in Ally, formerly known as General Motors Acceptance Corp.  The firm continues trying to dig out from the financial crisis of 2008 and a disastrous foray into the mortgage business.

Ally said Gerald Greenwald, former chairman and chief executive officer of United Airlines and vice chairman of Chrysler Corp., will join its board along with Henry S. Miller, an experienced private equity executive.  Both were nominated by the Treasury Department.

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“Gerald and Henry are valued additions to the Ally board,” said Ally Chairman Franklin Hobbs. “They bring extensive experience from both the financial and auto sectors and will add key perspectives as Ally continues its transformation. We are pleased to have these two seasoned leaders join the board.”

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Chrysler Seeking New Finance Partner

But maker has no plans to start its own finance unit again.

by on May.01, 2012

Sergio Marchionne doesn't want to ally with Ally.

Chrysler Group is looking for ways to change another part of the bailout plan originally imposed by the Obama administration’s auto czar while the company was facing bankruptcy three year ago.

Chrysler has notified Ally Financial Inc. it will not renew its current operating agreement with the lender when it expires in April 2013.  It will seek to form a relationship with another source of financing for customers and dealers but Sergio Marchionne, Chrysler’s chief executive officer, said the maker has no plans to try and restart its own captive finance company.

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Chrysler actually may give up some profits produced by a captive finance company. But not having a captive finance company also removes the ever present temptation to use the subsidiary to produce short-term profits by taking unsustainable risks.

“It won’t pollute the industrial company,” noted Marchionne, who did not rule out signing a new agreement with Ally that includes modified terms.

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GM Takes Major Step to Sever Ties to Former GMAC

GM Sets $1 bil Price Tag on Ally Financial Shares

by on Mar.23, 2011

GM takes another step to sever ties with the former GMAC, now known as Ally Financial.

General Motors has announced it will use a new public offering to sell off $1 billion in preferred stock in Ally Financial Inc. — further distancing itself from its long-time in-house lending arm.

The shares represent 100% of the outstanding Series A preferred stock for Ally, which used to be known as GMAC, for decades the so-called “captive finance subsidiary” of the Detroit automaker. GM gave up control of GMAC in 2006 and has since taken steps to expand its sources of automotive lending.

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“Today, we are taking another step forward in our strategy to strengthen and simplify the company’s balance sheet,” said Chris Liddell, GM outgoing vice chairman and chief financial officer.

The transaction will result in a book gain of $300 million to be recorded in the first quarter of 2011. Following the sale, GM’s investment in Ally Financial will consist of a 9.9% interest in Ally common stock. GM reportedly passed on an opportunity to exchange the preferred shares for more equity in Ally Financial, which was originally known as General Motors Acceptance Corp.

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Cerberus Sells Chrysler Financial To TD Bank

Offsets some of equity firms losses on Chrysler bankruptcy.

by on Dec.21, 2010

Cerberus sells Chrysler Financial to TD Bank.

The TD Bank Group of Toronto has acquired Chrysler Financial from Cerberus Capital Management of New York City for $6.3 billion in cash.

The deal apparently reduces Cerberus losses on its ill-timed acquisition of Chrysler from Daimler AG back in 2007.  Cerberus paid $7.4 billion for Chrysler in August of 2007 and later got some additional consideration from Daimler for Chrysler assets in China but the investment in Chrysler’s automotive business was wiped out during the carmaker’s 2009 bankruptcy.

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“This transaction with TD is the right next step for the future of these businesses, their employees and customers,” said Mark Neporent, Senior Managing Director and Chief Operating Officer, Cerberus.  “It ensures that the acquired businesses will be part of a strong and well-capitalized financial institution, which will help create sustainable jobs,” he said.

Chrysler Financial nearly died two years ago when the auto industry was engulfed in the banking industry’s financial crisis in the winter of 2008 and 2009.

The deal gives Toronto Dominion all of Chrysler Financial’s processes and technology as well as its existing portfolio of retail assets on both sides of the border.

Following this transaction, the business, combined with TD’s current operations in Canada and the United States, will be positioned as a top 5 bank-owned auto lender in North America with substantial potential for growth, the firm projected.

“This transaction represents a unique opportunity to purchase a great organic growth platform at an attractive price,” said Ed Clark, Group President and CEO, TD.

“Chrysler Financial is a well-run business with the capacity for significantly higher returns over the next several years. This acquisition will allow us to leverage our lending expertise and financial strength to expand our presence in a large North American market with tremendous potential upside,” Clark said.

“Because we’re well-capitalized and a leading deposit franchise, we’ve been looking for opportunities to accelerate the growth of our loan book. This acquisition gives us that opportunity and also diversifies our lending portfolio.”

The acquisition will give TD a platform for asset generation in the North American automotive lending market, enabling it to significantly grow its consumer loan portfolio.

In addition to the existing dealer relationships that TD has in Canada and the U.S., Chrysler Financial’s dealer clients serve approximately 1 million customers. TD expects that the business could generate a return on invested capital of approximately 20% in three to four years, once it is operating at a steady run rate, Clark said.

The acquisition also sets up a competition with Ally Bank, formerly known as General Motors Acceptance Corp., which was left a substantial chunk of Chrysler Financial’s old business once GM and the re-organized Chrysler Group emerged from a structured bankruptcy.

GM Buys AmeriCredit, Aims To Rebuild In-House Lender

GM Financial deal valued at $3.5 billion.

by on Sep.29, 2010

GM's purchase of AmeriCredit will permit it to create a new "captive finance" subsidiary.

With the $3.5 billion purchase of lender AmeriCredit, General Motors plans to create a new, in-house financing arm, GM Financial, to replace the “captive” lender long known as General Motors Acceptance Corp.

The Detroit automaker was recently rebuffed in its bid to regain control of GMAC, now known as Ally Financial.  Having a wholly-owned financing unit, GM believes, can help enhance its ability to sell cars, trucks and crossovers while providing an additional profit center of its own.

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Industry Insight!

“This acquisition allows GM to offer an enhanced range of solutions for our customers and dealers, and establishes an important strategic capability for GM,” said GM Vice Chairman and Chief Financial Officer Chris Liddell.

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Chinese Auto Financing Business Booming

GMAC-SAIC sets record monthly contract volume.

by on Sep.14, 2010

World's largest auto market soon to be largest finance market as well?

Traditionally the new vehicle market in China was dominated by cash transactions. However, the Chinese desire for vehicles bought on credit might not be all that different than elsewhere. GMAC-SAIC Automotive Finance Co., Ltd. (GMAC-SAIC) today announced that it booked a monthly record for retail contacts in August, or more than 18,000 retail contracts in August.

China of course is the world’s largest auto market. GM and its joint ventures sold a record 1,826,424 vehicles in China in 2009.  GM ended 2009 number one among global automakers for the fifth consecutive year. With Chinese sales of 1,567,411 units through August 2010, GM is on track to remain number one in 2010.

The joint venture between Ally Financial Inc., Shanghai Automotive Group Finance Co., Ltd. and Shanghai General Motors Co. Ltd.,  has now  signed more than 109,000 retail loan contracts during the first eight months of 2010, which exceeds the 2009 full year total. Chinese industrial policy requires automakers to establish joint-ventures with local companies and reinvest profits in China.

“We are very pleased with yet another year characterized by strong business growth. Surpassing 100,000 retail contracts at this point of the year represents a significant milestone for not only us, but for the whole automotive finance industry in China,” said Rick Livingood, general manager of GMAC-SAIC.

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Taxpayer Owned GMAC Rebrands as Ally

The $100 billion GMAC auto finance operation moves on.

by on Jul.14, 2010

Your dollars are in his hands. If he cleans up the GMAC mess, taxpayers will be paid back.

Ally Financial Inc. (Ally) will rebrand its GMAC consumer and dealer-related auto finance operations in the U.S., Canada and Mexico and begin using the Ally name next month.

The latest move follows the transition of the GMAC corporate entity to Ally Financial during May 2010.

Both are attempts to leave behind GMAC’s tattered image and distance the company from the wildly unpopular taxpayer financed bailouts of last year.

The Ally brand will be used for auto financing activities in the three North American markets, including activities to support the following manufacturers: General Motors, Chrysler, Saab, Thor Industries and FIAT Mexico.

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Following the Money!

The U.S. Department of the Treasury last December provided an additional $3.8 billion in capital from taxpayers to GMAC to keep it solvent, in addition to almost $14 billion previously forwarded. (See Taxpayer Owned GMAC Reports Record Q4 Loss and U.S. Takes Controlling Interest of GMAC ) Results for the 2009 fourth quarter and full year were largely affected by losses related to GMAC’s reckless lending practices in its mortgage operations.

The Obama Administration has thus far been unable to implement any reforms whatsoever in financial regulation after the collapse of the Lehman brothers or AIG, among others, in the fall of 2008.

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