The U.S. Treasury Department plans to sell $3 billion of Ally Financial Inc. common stock, reducing taxpayers’ stake in the firm to 37%.
Bloomberg reported that the U.S. will sell 410,000 shares for $7,375 apiece in a private offering and leave the government with about 572,000 shares of the auto lender, the Treasury said today (Jan. 17) in a statement. The government, which didn’t disclose a buyer, will work with the company to explore ways to further reduce the investment that may include a public offering or an additional private sale of common shares, according to the statement.
“The strong investor interest is a testament to the significant transformation of the company,” Ally CEO Michael A. Carpenter said in a separate statement.
Ally, known as GMAC when it was the captive-finance arm of the automaker that’s now called General Motors Co., won Federal Reserve approval to become a bank holding company in December 2008. The change enabled it to tap a U.S. rescue that swelled to $17.2 billion. Taxpayers still held a 64% stake in Ally as of Nov. 20, according to the company.
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With Ally Financial having to refund money to victims of alleged bias in auto loans, are the dealerships that originated those loans now exposed to liability?
Maybe, according to some consumer advocates.
Automotive News reported that under the “disparate impact” theory pursued by the Consumer Financial Protection Bureau (CPFB), the central issue is dealer discretion in setting the dealer reserve — the share of the customer’s interest rate that dealerships earn for negotiating the finance contract. By that theory, it’s the dealership that’s discriminating, whether accidentally or on purpose; the lender is liable only for the pricing policies that allow it to happen.
Under the settlement announced by the CFPB this week, Ally Financial agreed to pay $80 million in consumer restitution and another $18 million in civil penalties for alleged discrimination against minority buyers. Lender policies resulted in a disparate impact against legally protected classes of borrowers, the CFPB said.
Some consumers who get a refund may want to sue the dealership that allegedly discriminated against them, said attorney Dan Blinn of the Consumer Law Group in Rocky Hill, Conn. He has represented consumers in past lawsuits against dealerships.
“It actually is the dealership conduct that results in the disparate impact. But it is the lender policy that leads to that discrimination,” Blinn said in a phone interview. “Some consumers may want to sue a dealership, if they understand that it was the dealership’s policies that led to the discrimination.”
John Van Alst, an attorney for the Boston-based National Consumer Law Center, agreed that some consumers may react that way, but he said mandatory binding arbitration clauses in most finance contracts would make it difficult for an individual to sue.
State authorities and the U.S. Department of Justice theoretically could file enforcement actions against dealerships for alleged discrimination, he said.
Blinn said even if dealers are theoretically at fault, lenders have enough power in their hands to reduce the risk of bias.
“The finance companies do have responsibilities here,” Blinn said. “The only way to address it and make sure all consumers are treated fairly without regard to their race or ethnicity is to make sure the finance companies have procedures in place to prevent it from happening.”
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General Motors Co. completed the sale of its 8.5% stake in Ally Financial Inc. for about $900 million as the automaker moves to sever ties from its former financing arm.
The sale will result in a gain of about $500 million in the fourth quarter, GM said today in a statement. The buyers weren’t named.
Ally, formerly known as GMAC, is seeking to regain its independence after taking a U.S. bailout during the financial crisis that was designed to keep the auto industry afloat. Taxpayers still held a 64% stake in Ally as of Nov. 20, according to the company. GM said the carrying amount of the stake was $397 million and the fair value was $866 million at the end of September.
“This transaction releases capital from a non-core asset and further enhances our financial flexibility,” GM CFO Dan Ammann said in the statement. “Ally continues to play an important role in financing our dealers and customers in the United States.”
GM’s stake was held indirectly in an independent trust, according to the automaker’s quarterly securities filing.
Ally Financial came in first place on the 2013 Big Wheels Report list of top auto finance companies. The annual report, issued by Auto Finance News, ranks auto finance companies by the amount of finance contracts and leases outstanding each year.
“Every day our people work hard to set the industry standard for products and services that deliver real value to dealers,” said Tim Russi, president of Ally Auto Finance. “We’re proud to be recognized on this list.
“We wouldn’t be at the top of this list without our dealer customers,” Russi said. “Dealers are at the center of what we do. We only win when the dealers win.”
To learn more information about the report, please visit www.autofinancenews.net.
About Ally Financial Inc.
Ally Financial Inc. is a leading automotive financial services company powered by a top direct banking franchise. Ally’s automotive services business offers a full suite of financing products and services, including new and used vehicle inventory and consumer financing, leasing, inventory insurance, commercial loans and vehicle remarketing services. Ally Bank, the company’s direct banking subsidiary and member FDIC, offers an array of deposit products, including certificates of deposit, savings accounts, money market accounts, IRA deposit products and interest checking. Ally’s Commercial Finance unit provides financing to middle-market companies across a broad range of industries.
With approximately $166.2 billion in assets as of March 31, 2013, Ally operates as a bank holding company.
The government is hoping that Monday’s (May 14) bankruptcy filing by Ally Financial’s troubled mortgage business will help the company repay its government bailout faster.
The Associated Press reported that Residential Capital, or ResCap, filed for Chapter 11 bankruptcy protection in New York, unable to make payments on debt taken out to finance soured home mortgages.
The filing will separate the money-losing ResCap subsidiary from Ally’s auto loan and banking businesses – which includes its RV interests (see previous RVBUSINESS.com posting) – allowing those other businesses to grow and speed repayment of Ally’s bailout loans from 2008 and 2009, Ally said.
Ally also said Monday that it is exploring the possible sale of its international operations, a move that also should help strengthen its finances and make payments to the government. International businesses include auto loan, insurance and banking operations in Canada, Mexico, Europe, England and South America.
Ally, which is 74% owned by the U.S. government, was the financial arm of General Motors until the banking industry meltdown in 2008. It needed a $17.2 billion bailout to survive the downturn.
Ally has repaid about $5.5 billion, and it still owes the government just under $12 billion. The government is hoping to get the rest of the money back through a public stock offering by Ally, or perhaps sale of its remaining businesses.
When the bankruptcy and potential sale of international operations are finished, Ally expects to repay two-thirds of its bailout, or about $11 billion. The additional payments could come by year’s end, the company said.
“We believe that this action puts taxpayers in a stronger position to continue recovering their investment in Ally Financial,” Assistant Treasury Secretary Timothy Massad said.
ResCap is a separate company, and the government does not hold any debt or equity in it, the government said. The ResCap board decided to seek bankruptcy protection on Sunday.
Ally’s statement said ResCap has reached agreements with key creditors for a speedy bankruptcy. But Ally has to put up $150 million for bankruptcy financing and pay $750 million to ResCap to make the deal work.
Ally also will make the first bid on up to $1.6 billion worth of troubled mortgages that will be auctioned. The agreements made before the filing have milestones for ResCap to come out of bankruptcy protection by the end of the year, Ally said.
ResCap also has agreements with big investors in mortgage-backed securities to support the bankruptcy reorganization, Ally said.
Ally Financial recently announced its participation in the RV Dealers International Convention/Expo Oct. 3-7 as a Copper Sponsor of the annual event.
Sponsored by RVDA, RVDA of Canada and the RV Learning Center, the expo will be held at the Rio All-Suite Hotel & Casino in Las Vegas.
In addition to its financial sponsorship, Ally representatives will be on hand to discuss dealer wholesale financing, retail financing and remarketing services. The bank holding company formerly known as GMAC, Detroit, Mich.-based Ally Financial was named the largest auto finance company in the U.S. earlier this year by the Auto Finance Big Wheels annual ranking of car lenders and lessors. Ally entered the RV financing market in June 2010 and began wholesale financing for RV dealers last November.
“We are committed to supporting RV dealers in their sales efforts and look forward to building lasting business relationships,” said Mark Manzo, Ally Financial vice president of Alliance Sales. “We are putting our expertise to work nationwide for the RV industry.”
Prior to the convention, dealers interested in Ally financing and services may contact the company at (800) 814-8842.
Ally Financial seized on a market buoyed by new loan originations to claim the title of largest auto finance company in the United States in 2010, according to the new Auto Finance Big Wheels annual ranking of car lenders and lessors.
Ally Financial, the bank-holding company that used to be known as GMAC, amassed an auto finance portfolio of $74 billion last year, $10 billion more than Toyota Financial Services, which came in second in the Auto Finance Big Wheels ranking. Ally recently stepped up its role in the RV industry with stated intentions of becoming a national scale wholesale and retail RV lender
“Ally entered 2010 with a new brand, the overhang of its federal government bailout, and performance uncertainty swirling around its largest patron, General Motors, and rose above all that adversity to exit 2010 as the No. 1 lender in the land,” said Marcie Belles, editor of Auto Finance Big Wheels. “It’s a testament to Ally’s comprehensive strategy to garner share in all segments of the industry.”
The top 10 auto finance companies in the US last year were:
1. Ally Financial
2. Toyota Financial Services
3. Chase Auto Finance
4. Ford Motor Credit Co.
5. Wells Fargo Dealer Services
6. Bank of America Dealer Financial Services
7. American Honda Finance Corp.
8. BMW Financial Services
9. Nissan Motor Acceptance Corp.
10. Santander Consumer USA
Auto Finance Big Wheels ranks the top 100 car finance companies in the nation by pouring through public documents, receiving data directly from lenders, and by applying a propriety formula for calculating outstandings and originations based on a variety of criteria. The 2011 report is the 12th annual Big Wheels published by Auto Finance Advisors, a consultancy dedicated to providing research and advisory services to the automotive lending and leasing market.
After the credit crisis sent the auto finance sector into a tailspin, the tide was turned in 2010 by a 31% increase in loan originations, compared with a year earlier. Toyota originated the most auto loans and leases last year.
“Last year saw the auto finance market resuscitate, and we forecast the industry to truly get its mojo back in 2012, particularly since car sales have taken off so far this year,” said Belles, who is also a principal at Auto Finance Advisors. “The market has a bright future.”
To help dealers close more deals quickly, Ally Financial has introduced a dealer approval program called “Ally RV Express.”
Dealers simply need to complete an Ally retail credit application and run a generic credit bureau report, according to a news release. Then, they verify that their customers meet a checklist of requirements based on the amount to be financed – such as credit score, credit history, minimum down payment, advance and term. Provided the applicant meets the criteria, the dealer can offer a contract to the customer and sell it to Ally Financial for funding. The Ally RV Express program can be applied to RVs of 2006 or newer models.
“Our goal is to help dealers sell more RVs and streamline the financing process for qualified customers,” said Mark Manzo, vice president of Alliance Sales for Ally Financial.
Information about the program is being provided to U.S.-based RV dealers who do business with Thor Industries Inc. Ally Financial was named the preferred retail finance provider for Thor RV dealers earlier this year, and announced its entry into general RV wholesale financing in November. For more information, dealers may call the Ally RV branch office at (800) 814-8842.
Thor is the world’s largest manufacturer of recreation vehicles, with a U.S. network of approximately 1,200 dealers selling brands such as Airstream, Breckenridge, CrossRoads, Dutchmen, Heartland, Komfort and Keystone RV.
“We benchmarked current options and needs in the industry and will offer a very competitive wholesale financing product for RV dealers,” Tim Russi, Ally Financial executive vice president for North American Operations, stated in a news release. “Our program is tailored to the recreation vehicle business with attractive terms and flexible credit lines that will accommodate the seasonal fluctuations in RV inventory. We view our retail and wholesale financing, along with remarketing tools, as a full-service offering for dealers.”
Thor RV Group President Ron Fenech said, “Dealer wholesale financing is a critical part of the RV business. We are thrilled to have a strong national lender like Ally stepping in to provide Thor dealers with competitive financing for their inventory.”
Qualified dealers may obtain wholesale financing from Ally Financial for all or a portion of their inventory. Ally Financial has a dedicated sales team devoted to the RV business. Representatives will be on hand next week at the 48th Annual National RV Trade Show in Louisville, Ky., to introduce the wholesale financing program.
Ally Financial became the preferred retail finance provider for Thor Industries RVs in April. Ally currently extends retail financing in about 40 states, with plans to expand its RV retail financing nationwide by the end of the year.
Ally Financial is diversifying its business as an independent bank holding company devoted to the broad automotive industry.
About Ally Financial Inc.
Ally Financial Inc. (formerly GMAC Inc.) is one of the world’s largest automotive financial services companies. The company offers a full suite of automotive financing products and services in key markets around the world. Ally’s other business units include mortgage operations and commercial finance, and the company’s subsidiary, Ally Bank, offers online retail banking products. With more than $173 billion in assets as of Sept. 30, 2010, Ally operates as a bank holding company. For more information, visit the Ally media site at http://media.ally.com.