UPDATED: 4/2/14 11:34 pm ET - adds details of IPO
A new and much bigger GM Financial is emerging this year -- a global, mostly prime-risk auto lender that looks a lot like the old GMAC captive finance company.
In a mirror image of sorts, a new Ally Financial is emerging this year, too. The new Ally is smaller and its auto finance and insurance operation is now limited to the United States. It also has a strong online consumer banking business.
In many ways, the two financial institutions have traded places. GM Financial, a one-time niche player in auto finance, has evolved into a globe-circling behemoth. Ally Financial, which as GMAC was once so large that the U.S. government felt compelled to rescue it rather than let it fail, today is a much smaller operation focused on a smaller number of core businesses.
GM Financial used to be known as AmeriCredit Corp. At the time, it was a publicly traded independent auto-finance company that specialized in the subprime market.
Then, in 2010, GM acquired AmeriCredit, setting it on a transformational path toward becoming GM's worldwide captive finance company.
The biggest changes are only now taking effect.
"In 2013 we were able to double the size of our company," Dan Berce, CEO of GM Financial, of Fort Worth, Texas, said in a conference call for investors and analysts.
Berce said the increase was the result of GM Financial acquiring most of Ally Financial's former International Operations in Europe and Latin America, plus growth in U.S. retail leases and commercial loans.
Doubled in size
At the end of 2013, GM Financial's outstanding consumer vehicle loans and leases, plus commercial loans, were $33.3 billion, compared with $13.3 billion a year earlier.
GM Financial should get even bigger when it closes a previously announced deal to acquire the former Ally joint venture operations in China.
That closing is expected this year, GM Financial said.
Once it's fully assembled, GM Financial will be much more of a traditional captive finance company, a wholly owned subsidiary that offers prime and subprime loans and leases, plus commercial lending for dealers. With the addition of International Operations, GM Financial fills the same role for GM in those markets.
"We have solidified our position as GM's captive auto finance company with global capabilities. That position will be even stronger in 2014 as we launch prime lending and commercial vehicle lending in the U.S. about midyear," Berce said.
Meanwhile, the new Ally Financial, formerly known as GMAC Financial Services, has shrunk. Besides selling off its International Operations, Ally also shed its giant mortgage subsidiary, Residential Capital, a once-thriving business that almost pulled GMAC down with it into bankruptcy.
In 2006, GM sold majority control of GMAC but retained a minority share. Falling auto sales, the credit crisis and the collapse of subprime mortgages leading up to the recession forced GMAC into needing a U.S. government bailout in late 2008.
Ally allowed its ResCap unit to file for bankruptcy protection in 2012, but the ResCap bankruptcy plan wasn't approved in U.S. Bankruptcy Court until December 2013. The court's ruling finally left Ally free of its legacy obligations to ResCap, the company said.
Also in December 2013, GM sold its last remaining 8.5 percent stake in Ally.
This year Ally Financial's top priority is to buy out its remaining U.S. Treasury ownership -- which was 37 percent as of Feb. 6 -- and complete an initial public offering it filed on March 27. The IPO will leave Ally without GM or government ownership for the first time.
According to the filing, the IPO consists of 95 million shares belonging to the U.S. Treasury.
With an expected price of $25 to $28 a share, the government would receive about $2.4 billion to $2.7 billion. Ally will not receive any of the proceeds from the sale, which is expected to take place this month. After the IPO, the government will still own about 17 percent of Ally -- less than half of its present stake, according to SEC documents.
"Free at last, free at last!" said Ally CEO Michael Carpenter, in an interview at the National Automobile Dealers Association convention in New Orleans in January.
"If you look back at 2013 it was an incredibly eventful year for us. It was a seminal year, especially in the fourth quarter," Carpenter said, "much of which was setting the stage for the future."
Carpenter said that as a smaller, independent company, Ally could continue to lower costs to match its size.
As of Dec. 31, 2013, Ally had 7,100 employees, down from 10,600 a year earlier. The figures include operations that had been put up for sale.
Ally plans to continue to pursue business with dealers and automakers, including former partners GM and Chrysler Group, only with less reliance on deals supported by carmaker incentives. Ally is also working to increase used-vehicle and subprime loans, plus leasing for all brands.
Ally also retains its insurance operations, which provides commercial insurance for dealers, plus F&I products, including extended-service contracts aimed at consumers via dealerships.
You can reach Jim Henry at firstname.lastname@example.org