Since Michael Carpenter became CEO of GMAC Financial Services in November, he has been listening to dealers to fine-tune GMAC's business model. He is broadening access to capital to allow GMAC to offer competitive financial services to auto retailers. And he is looking to add dealers beyond the General Motors Co. and Chrysler Group networks by arranging to offer his retail finance programs to dealers of all makes through an alliance with the DealerTrack credit application network.
Carpenter, 62, discussed his goals for GMAC with Staff Reporter Donna Harris the week of the National Automobile Dealers Association convention in Orlando in February.
Since you became CEO, you've spent a lot of time with dealers.
The relationship with dealers is critical. We have a three-way partnership between the manufacturer, the dealer and GMAC. Those groups have to be mutually dependent on each other to be successful. We have to spend a lot of time listening to the manufacturer and listening to what the dealers say.
I have not spent as much time as I would have liked since I became CEO Nov. 17. I met some dealers one-on-one. I met the CEOs of some of the largest dealership groups in the country. I also am meeting privately with GM and Chrysler dealers in groups of three and four. I met with the GM advisory council and the council's subset dealing with financial issues in Detroit around the time of the auto show.
I also attended the National Automobile Dealers Association convention to spend more time with dealer customers and to get more feedback.
What did you learn?
First, they have a real desire to see GMAC be successful. Secondly, as you would expect, they also have ideas -- and good ideas -- about how GMAC can do a better job. That's my mission.
What changes do dealers want?
We need to be more effective on the leasing side. I have been meeting with both top executives from GM and Chrysler. On a month-to-month basis, a coordinating committee meets, allowing senior people in the auto finance business to get together to figure out what we need to be doing differently or better. A recent example is the Toyota recall situation. We discussed how we could respond more opportunistically. We have the forums in place to really make those partnerships work extremely well.
How is the new Ally Dealer Rewards program going?
The feedback has been very positive. We have tweaked the program after listening to the dealers about what's working and what's not working. We reset the thresholds for rewards to make them more realistic. But this is really fine-tuning rather than a major structural change. We anticipate making small changes every month as we develop it.
What kind of feedback have you received from Chrysler dealers?
The Chrysler dealers I have spent time with are incredibly enthusiastic. Without GMAC, many of them would be out of business. GMAC has 80 percent of the Chrysler wholesale business. We approved an enormous percentage of the Chrysler dealers for inventory financing. Over time, as we put some of our finance issues behind us, our knowledge of the industry and our infrastructure will be very beneficial to the dealer community.
The floorplan business is still fairly tight. Do you intend to offer inventory credit lines to dealers outside the GM and Chrysler networks?
I would anticipate that as our access to capital markets improves, we would expand beyond GM and Chrysler. We are certainly having a number of discussions. Our recent announcement of the DealerTrack partnership allows us to expand our dealer relationships in retail finance. We can work with any dealer going forward. In wholesale finance, we're focused on protecting and supporting the historical relationships rather than being overly expansive. We prefer to have a relatively exclusive relationship with a group of dealers, as we do with GM and Chrysler.
Some dealers are concerned about the government's majority stake in GMAC. Are you making progress in broadening your access to capital?
When I became CEO, we could not access capital markets, and the federal government believed we were still deficient in the amount of capital we needed. The first priority was to work out the final capital infusion into the company from the U.S. Treasury, and it had an extremely favorable impact. We did a bond issue in February and raised $2 billion from the best names in the bond business. It was the first time GMAC has been able to access the capital markets in three years.
Now that we have access, we'll be doing a lot of that kind of financing over the next year or two. The objective is to broaden the sources of capital available to the company and reduce the cost of that capital to become investment grade again. It will allow us to be more competitive.