Ally Financial is moving to replace its remaining exclusive leasing deals with General Motors, assuming the carmaker will eventually take that business in-house completely, the lender’s chief executive said in an interview.
GM has already said that its financing arm, GM Financial, would replace Ally as the exclusive lessor for Buick, GMC and Cadillac vehicles. Ally expects GM Financial to eventually take over leasing for Chevrolet as well, Ally chief executive Jeffrey Brown told Reuters.
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“That is a planning assumption we’ve got today,” he said.
GM’s retreat from Ally threatens to cut off about 25% of the bank’s retail lending business, though the company expects the changes will have a minimal financial impact in 2015. Brown said Ally is redeploying capital to other types of business, like lending for used cars and to dealers not associated with GM and Chrysler.
Last year, Ally’s used car lending volume was up 18% from 2013 and its loans to those kinds of dealers increased by 45%. Despite that growth, 23% of its US$41bn in auto loans and leases last year came from the type of leasing relationships that GM is pulling away from.
Reuters noted that Ally and GM have a long standing relationship, beginning in 1919 when GM launched its first in-house financing arm, known as GMAC. The automaker sold a majority stake in GMAC to private equity firm Cerberus Capital Management in 2006 but maintained the business relationship.
Both GM and GMAC were bailed out by the US government at the height of the financial crisis, and in 2013 GM sold the last of its ownership stake in Ally, as GMAC renamed itself in 2009.
Their relationship has loosened in recent years as GM has renewed its interest in financing its customers’ purchases amid a broader boom in auto sales. GM bought the auto lender AmeriCredit in 2010 and renamed it GM Financial.
A GM spokesman told Reuters that even though the automaker is boosting the capability and scale of its own lending arm, it still expects Ally to play a role supporting GM dealers and customers.
Ally will continue to assist dealers with leasing if GM Financial decides not to be the exclusive provider of leases for all of its brands, Brown said, but the company is preparing for worst-case scenarios.
“We are going to support the dealers,” Brown said. “We don’t hold grudges.”
In addition to doing more used car lending, Brown also expects to make more loans to borrowers with weak credit, an area that U.S. law enforcement officials have been focusing on more recently.
“I think nonprime lending can be done responsibility,” Brown told Reuters.
