Ally's core business is driving optimism

SAN FRANCISCO — Since Doug Timmerman took over as Ally Financial's president of auto finance last spring, he's been building relationships with dealers and focusing on the lender's core business: retail and commercial auto finance.

Timmerman, 54, expects continued gains for Ally, especially in the used-vehicle market. In 2018, used-vehicle loan originations made up more than half of Ally's auto portfolio.

"If you talk to dealers, margins are top of mind. As they think through that, there is a general trend toward the used-car business," Timmerman said. "We try to find alignment where it's good for us and good for our dealers, so that's kind of a perfect point. We like the used-car business because of the consistent flow; we like the economics."

Ally also has partnered with at least half a dozen companies on digital financing platforms and introduced products of its own, such as Clearlane, an online financing marketplace it launched in 2017. Although a focus on the core business is paramount, Timmerman said, Ally will continue to innovate.

Timmerman spoke with F&I Editor Hannah Lutz at the NADA Show here last month. Here are edited excerpts.

Q: Since you were appointed president of auto finance in April, what have been your priorities?

A: There are a lot of touch points. The primary is getting out a lot and trying to touch our colleagues who are spread out geographically. And then also touch our dealer customers. One of the advantages I have, since I have moved 12 times throughout my career, is that I have had the opportunity to build relationships with dealers across the United States.

My message to the team has been focusing a bit more on the core business, focusing on what we do well. That has everything to do with our optimism that there's opportunity for us to get a little bit more out of the core business [of] auto finance. That's certainly not a message of being less innovative or less creative. I think that's a difference maker for us. It's part of our culture. It's, quite frankly, why people love to work for Ally.

What are your goals for 2019?

There are probably going to be stronger challenges in 2019 versus 2018 in the industry. If you look at new-vehicle retail sales, they might continue to decline a bit. But from historical standards, we think that they're still strong. We think the used-car market will continue to be strong. We're pretty well-balanced between new and used. We're a full-spectrum lender, so we can kind of play as the market evolves. It's been evolving a little bit more toward the used space. We like that side of the business. And very importantly, for our dealer customers, that's a focus point for them. Anything that aligns to a mutual win-win for us and our dealer body is a great focus point for us.

How are you working to improve dealer relationships?

Consistency is critically important because it's important to our dealers. On top of that, [we want to take] every opportunity to continue to improve the speed of decision and making the experience for the dealer the best it can be in part by onboarding the business through our books, which means contract processing on their side. If you ask most dealers what's important to them, especially as at some point in time there will be a turn in the cycle, consistency is critically important. That's usually a time where we shine very well relative to the competition.

Where does Ally stand on its digital efforts?

We have an assessment process that we use to help guide us. That assessment process is intended to provide clarity to the team and discipline for us as leaders of the business. It's simply [asking], are the things that we're thinking about, working on, talking with partners about — are they things that fit our strategy? Does it fit our core business? Does it align well to our dealer partners? Does it have the potential to scale, to be big enough to matter? And then of course, like any other business, we're looking for a creative return. A lot of what we do is through partnerships, and we're very excited with the partnerships we have.

You led Ally's insurance business from 2014 to April 2018. What have you taken from your time on the insurance side and applied to the finance side?

The dealer customers are the same. Our insurance business is a little bit more focused relative to consulting the dealers on how to optimize their business, so that makes it unique. The two businesses fit very well together. When I went to the insurance business, my focus was making sure we're very coordinated with the two businesses. And as I come to auto finance, it's making sure I continue to focus on that same thing: coordination between the auto finance teams and insurance teams and getting the leverage of both teams working together. And those teams are working together very well.

How is Ally using alternative data?

We use it in our credit decision and on the consumer side. We're exploring the use of it in other ways in how we service our customers. We've been doing that really since the inception, and we're finding that there's a lot of value in doing it. It's something that has certainly added a lot of value to our business. It adds a lot of value relative to the consumer because it helps you make a better decision there. It's probably helped more decisioning into the positive, allowing consumers to be able to be approved for a loan. And, of course, that helps our dealer business, too.