Ally Financial Inc. wrote almost half of the loan and lease contracts on new General Motors Co. vehicles sold in the United States in the fourth quarter of 2010, Automotive News reported.
The 49.7% penetration for GM vehicles was up from 34.2% in the third quarter of last year and up from 30.3% year-over-year.
The jump in GM penetration took place as Ally’s global auto finance and insurance business more than doubled its fourth-quarter income year-over-year to $765 million, from $283 million. The company, in a statement today, attributed the growth to lower loan losses, a rise in retail loan volume and a stable wholesale finance business.
The North American auto finance business reported pretax income of $589 million for the quarter, up from $343 million year-over-year.
Ally is the reorganized and renamed banking entity that was GM’s longtime captive lender, GMAC Financial Services. GM and its trust fund still control about 9.9% of Ally’s common stock. The U.S. Treasury Department controls 73.8% of the stock.
No finance incentives
The increase in penetration was significant because it was achieved primarily without the finance incentives Ally offers through an exclusive preferred lender contract with GM. The contract is to expire in 2013.
“Today we are not dependent on it for our success in the marketplace,” CEO Michael Carpenter told analysts in Ally’s fourth-quarter conference call this morning. “It will be a complete nonissue.”
Carpenter, 63, said he knew of no plans for GM-owned GM Financial to compete with Ally for the inventory finance business. The two compete for retail leasing and nonprime lending.
Ally’s penetration of the wholesale finance business remains more than 82% on GM stock and 76% for Chrysler stock.
Its retail penetration for new Chryslers was 36.3% for the quarter, down from 49.4% in the third quarter of last year, but up year-over-year from 25.5%.
Overall retail volume in the United States rose 72% from the year-ago fourth quarter to $9.3 billion from $5.9 billion, including new and used, loans and leases. That includes steady increases in its new-vehicle retail loan volume outside the GM and Chrysler dealer networks — to $300 million from $100 million year-over-year.
The company says the boost is linked to rising auto sales, expansion of its dealer network and dealer rewards program and greater focus on lease and nonprime credit business.
Carpenter also said the bank holding company model has lowered Ally’s cost of funds so it can compete effectively for dealers’ business with banks and even captive finance companies. It is more competitive than when it was GMAC, and its cost of money is about a half-percentage point lower than Ford Motor Credit Co.’s, he said.
The savings will continue as Ally builds its bank deposit base and buys out the U.S. Treasury’s stake in the company, he said.
The bigger picture
For its entire business, Ally said fourth-quarter earnings were $79 million, compared with a loss of $4.95 billion in the same period a year earlier. Annual profit was $1.1 billion versus a $10.3 billion loss in 2009.
Carpenter is preparing the company for an initial public offering that may take place this year. Last week, Ally interviewed investment banks to manage the IPO while the U.S. Treasury Department named Perella Weinberg Partners LP to assist with the disposal of its stake.
Ally reduced risk in its mortgage business, which “significantly strengthened the company and will enable repayment of the U.S. Treasury’s investment over time,” Carpenter said in the statement.
“These results are very important for their IPO,” Mirko Mikelic, a senior money manager at Fifth Third Asset Management in Grand Rapids, Mich., said before the announcement. “It obviously helps with the pricing, and if they continue to post good results there will be strong demand.”
The mortgage business posted a $172 million pretax profit from continuing operations, compared with a loss of $180 million in the last three months of 2009.
Ally said today it hasn’t found “any evidence of inappropriate foreclosures in its review process,” amid concern some lenders have taken improper shortcuts to speed the process of taking homes.