Ally's auto business rises in Q2, but mortgage losses put company in red
Ally Financial Inc. today reported higher auto originations and higher pre-tax income for its North American auto business, but the company posted an overall net loss of $898 million for the second quarter, due to its failed mortgage business, Residential Capital LLC.
Not counting a $1.2 billion charge related to ResCap -- which filed for Chapter 11 bankruptcy protection in May -- Ally posted pre-tax income of $533 million for the quarter, up 14 percent from a year ago. Pre-tax income for the North American auto business was $631 million, up 13 percent from a year ago.
"We are the No. 1 provider of U.S. automotive financing," said CEO Michael Carpenter.
Ally is the biggest originator of U.S. auto loans and leases.
The company reported U.S. consumer auto originations of $10.5 billion in the second quarter, up about 11 percent from the same quarter a year ago. Within that number, Ally is working to become more diversified and less dependent on GM and the Chrysler Group.
Ally serves those OEMs and a few others as a preferred lender, with first dibs on subvention programs. In April, Chrysler said it would allow its current agreement with Ally to expire at the end of April 2013. GM's current agreement expires in December 2013. The GM relationship is already on a less exclusive basis than it once was. GM can offer incentive programs to other lenders, provided it makes the same offer to Ally first.
As he has done for the last couple of years, Ally's Carpenter downplayed the central importance of subvention programs to Ally's future. Ally is the former GMAC Financial Services. GMAC was GM's captive finance company, with exclusive claims on any incentive programs GM offered.
Ally has stressed that its current agreements with GM and Chrysler govern incentive programs exclusively. The lender expects to continue working closely with the manufacturers.
"We are today much more diversified -- across brands, across dealers, across product offerings and across the credit spectrum," Carpenter said.
"That isn't to say our relationships with OEMs aren't important. They're very important. But they no longer define us, or constrain our potential," he said in a conference call for analysts and investors.
Ally said 6 percent of its U.S. originations were with brands other than GM or Chrysler in the second quarter, up from 4.2 percent a year ago. Used vehicles for all brands accounted for 24 percent of U.S. originations, up from 22.1 percent.
Subvented loans for GM and Chrysler were still substantial, and larger than a year ago. GM subvented loans accounted for 18 percent of U.S. originations, up from 14.7 percent a year earlier. Chrysler subvented loans were 7 percent of U.S. originations, up form 5.3 percent.
Still Carpenter said Ally does not rise or fall based on subvented business alone. He said, "When these agreements with Chrysler and GM expire next year, those are going to be bumps in the road, or modest changes or whatever."
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