Ally says Q4 net income falls, GM relationship extended

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Ally Financial said today it has posted fourth-quarter net income of $104 million and lower pretax income for its auto finance business.

The company also said its preferred-lender relationship with General Motors, set to expire Dec. 31, was extended while the companies negotiate a new pact.

Ally Financial's bottom line fell 93 percent from the fourth quarter of 2012, but results for the 2012 quarter were boosted by international operations that were later sold -- mostly to GM, Ally's former parent -- and by a one-time tax benefit.

For Ally's auto finance sector, pretax income was $305 million in the fourth quarter of 2013, down 18 percent from the 2012 period. That's not counting a pretax charge of $98 million in the 2013 quarter related to a settlement reached by Ally, the Consumer Financial Protection Bureau and the U.S. Department of Justice. With the one-time charge, pretax income for auto finance was $207 million, down 44 percent.

"The last several years have been years of significant transformation," said CEO Michael Carpenter, during a conference call for analysts and investors. "We're happy to have a lot of that in the rearview mirror."

Settlement terms

The CFPB said in December that Ally allowed discrimination by allowing dealerships to set their own rate for dealer reserve, the small amount of interest dealerships are allowed to add as their compensation for originating finance contracts. The CFPB is trying to get lenders to switch to flat fees or some other form of dealer compensation.

The bureau found that dealerships in Ally's network charged higher amounts of dealer reserve for minority groups compared with "similarly situated" borrowers who were not minorities. Ally denied tolerating discrimination but accepted the settlement.

Ally's combined U.S. auto loan and lease originations in the fourth quarter were $8.2 billion, down 8 percent from the 2012 period. As separate categories, though, Ally said its originations increased for used vehicles, leases and for brands other than those of GM or Chrysler Group.

However, those volume gains were offset by the loss of Ally's subvented business from Chrysler Group, Ally said. Chrysler switched its preferred-lender relationship last year to Dallas-based Santander Consumer USA.

GM relationship extended

Ally's preferred-lender relationship with GM was set to expire Dec. 31, but Ally President Bill Muir said today that the partners extended the existing relationship while they negotiate a new contract.

"We extended our agreement for a period of time while we are finalizing a new agreement," Muir said.

Ally's prior agreement with GM limited GM's use of other lenders for its incentive programs. Those other lenders include Wells Fargo Dealer Services and U.S. Bank, but Ally has the option of making the same offer side by side.

Ally spokeswoman Gina Proia declined to comment on the nature of the relationship post-Dec. 31.

You can reach Jim Henry at autonews@crain.com.


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