Tag Archive | "GM Financial"

GM Financial Triples Share of GM Leases

SAN FRANCISCO AND FORTWORTH, Texas — Ally’s reaction to General Motors internalizing its leasing program came up at the end of GM Financial’s fourth quarter 2014 earnings call. Daniel Berce, the captive’s president and CEO, said the decision shouldn’t have surprised executives with GM’s former captive finance arm.

“That’s about increasing customer loyalty,” Berce said of GM’s decision. “Lease is a very important product from a loyalty standpoint, and having that customer data and relationship in-house and within control of the GM umbrella was extremely important. Taking that profitability in-house was another factor to consider.

“I don’t think bringing it in-house should be a surprise if you look at our ramp of penetration through 2014,” he added, noting that the firm started out the year with about a 15% share in GM leases. It finished 2014 with just less than a 50% share of the OEM’s lease business.

GM Financial doubled its lease origination volume from a year ago to $7 billion. For the December quarter alone, lease origination volume totaled $2.1 billion.

GM’s decision to end its leasing relationship with Ally Financial and U.S. Bank was announced shortly after the end of last quarter, with GM Financial officially becoming the OEM’s exclusive subvented lease provider for Buick-GMC on Feb. 3.

“Cadillac will follow closely after that [in March], then Chevy,” Kyle Birch, executive vice president and COO of North America, to F&I and Showroom at last month’s 2015 National Automobile Dealers Association (NADA) Convention & Expo in San Francisco. “By mid-year, we’ll have full lease exclusivity with all GM brands.”

Birch noted that GM Financial spent a lot of time and investment last year bringing its systems online in anticipation of the November 2014 rollout of its prime APR product. The company also rolled out last May a floorplan financing product; Berce noting during the company’s investor call that he has “pretty modest aspirations” for the product in terms of market share.

“We don’t have any plans at this point to supplant other providers,” he said.

But developing score cards and adding auto decisioning systems for its prime business weren’t the only infrastructure investments the company made last year. Under the direction of Will Stacy, senior vice president of digital and technology services, GM Financial is also working on systems that will drive a better connection between customers, GM and the OEM’s dealers.

“We’re trying to build integration tools with GM so you can apply for credit in an easier way through their sites and through their dealer’s sites,” Stacy told F&I and Showroom at the NADA’s annual convention. “So the idea would be, we’d offer an application or widget that goes on dealership sites so you can apply for a GM Financial loan through one of those 4,200 websites that GM and Cobalt host for their dealers, as well as a beefed up the customer experience for current and future customers with native applications on iPhones, Androids and customer portals.”

The goal, Birch added, is to create touchpoints that will allow customers to interact with the captive finance company however they want, whether through its chat features on the captive’s website, self-service portals or mobile connectivity. “We want to make sure when we have a customer on the books that we’re touching them at the right time to drive them back to the dealers,” Birch explained.

The investments made in the company’s infrastructure were partly responsible for the decrease in pre-tax earnings in the December quarter, which fell from $225 million in the year-ago quarter to $120 million, Birch noted. The company’s acquisition of Ally Financial’s international operations was another factor.

Full-year earnings for the captive were $537 million, down from $556 million in 2013. For the December quarter, the company posted earnings of $59 million, down from $121 million in the year-ago quarter.

Full-year consumer loan and lease originations totaled $21.4 billion, $6 billion for the December quarter alone. Prime originations for GM vehicles totaled $493 million for the year. Outstanding balances of consumer finance receivables totaled $25.7 billion for the year.

The company also added 81 dealers to its commercial lending business, bringing the captive’s total dealer count to 487.

Birch also noted stable credit metrics, with consumer finance receivables 31 to 60 days delinquent accounting for 4.2% of the captive’s portfolio as of Dec. 31, 2014. Accounts more than 60 days delinquent were 1.7%.

Annualized net losses were 2.2% of average consumer finance receivables for the December quarter, up from $2.1% one year ago. For the year, consumer net losses were 1.9%.

GM Financial also reported having total available liquidity of $9.3 billion as of Dec. 31, 2014. That total consisted of $3 billion of unrestricted cash, $4.8 billion of borrowing capacity on unpledged eligible assets, and $0.5 billion of borrowing capacity on unsecured lines of credit and $1 billion of borrowing capacity on a junior subordinate revolving credit facility from GM.

“2014 was a good year for our company,” Birch said at the NADA convention. “Every quarter we had improvement in volume and credit losses. The biggest thing for us in 2014 is we spent a lot of time and investment on bringing all of our systems together, understanding that we were going to get in the prime business from an APR perspective.”

Asked if the company would venture into F&I products for GM, Birch said, “We’re not doing that right now. The products out there right now are GM-based and -backed. We helped in some of the rollout of those products. Now that’s being handled internally by GM. We would expect at some point in our future, and I can’t tell you when, but there’s a natural evolution for those types of products to come back to the finance company.”

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Ally ‘Highly Confident’ About Overcoming Boot From GM Leasing Program

DETROIT — Just days before it named Jeffrey Brown as its new CEO, Ally Financial’s then-CEO Michael Carpenter expressed surprise at a move by General Motors to put 100% of its U.S. Buick, Cadillac and GMC lease incentives in the hands of its captive, GM Financial.

“While we were not surprised by the idea of GM growing their captive, we were surprised that they would exclude any competition in the lease space, where Ally has done such a great job for them over the last several years,” Carpenter said during a quarterly earnings call last week. “And frankly, we don’t see how auto sales are increased by having less, otherwise known as no, options for consumers and dealers.”

In early January, General Motors announced that it planned to use GM Financial as the exclusive provider of subsidized leases in the United States, edging out both Ally and U.S. Bank from its lucrative subsidized leasing business.

“This will absolutely not impact our strong relationships and commitment to GM dealers and we will continue to support the channel,” Carpenter added.

The former CEO went on to say that once the company frees up capital from the subvented GM leasing business, it can “redeploy profitably in these other areas and increase share.” Those other areas, according to Carpenter, include the used-car market, franchised dealers and OEMs.

“For example, even though we’re doing well and we have 4% share of the 10,000 non-GM/Chrysler relationships we have, over 6,500 of those do a very modest level of business with us today,” he noted. “And we believe we can increase that penetration with those dealers over the near term.

“We will also continue to have conversations with other auto makers to see how Ally can drive more value in their channels. And these OEMs are a lot more interested in talking to Ally now that we’re out of the TARP, than they were before.”

During the call, officials reported a fourth quarter net income of $177 million, compared to $104 million in the fourth quarter 2013. For all of 2014, the finance source saw a net income of $1.2 billion, up from $361 million in 2013.

The increases were driven in part by results from Ally’s dealer-financial services business, which was headed up by Ally Financial’s new CEO, Jeffrey Brown. The group increased pre-tax income by 45% compared to the prior-year period, but that increase was due, in part, to a $98 million fine levied against Ally in the fourth quarter of 2013 by the Consumer Financial Protection Bureau and U.S. Department of Justice.

“Obviously, the year-over-year delta is impacted by the $98 million CFPB charge we took last year,” noted CFO Christopher Halmy during the call.

Ally’s auto finance franchise business remained strong during the quarter, with earning assets for the business up 3% year-over-year. Consumer auto financing originations for the quarter increased, and originations for the year hit $41 billion, the highest full-year total since 2007.

“The originations in the quarter were $9 billion, which we feel good about given the seasonal nature of the business,” Carpenter said. “These origination levels were driven by strong performance across multiple channels and were higher in every product year over year with the exception of subvented loans.”

New and used originations from non-GM/Chrysler dealers improved 37% compared to the prior-year period and increased 45% for the full year. The non-GM/Chrysler business now accounts for 22% of total consumer originations. Excluding originations from recreational vehicles, non-GM/Chrysler originations increased approximately 50% in the past year.

The finance source’s successes during the quarter and in 2014 as a whole had Carpenter “highly confident” that Ally will overcome being dropped from GM’s leasing program.

“… We have a range of options to handle these shifts in our business, which occur with some regularity,” he said. “And while the specifics may be a surprise of direction, we’ve dealt with this over five years. We have a battle-tested team. We’ve shown what we can do. We view this as another opportunity to evolve that business and we remain optimistic about the future potential, and we are committed to the plan that we showed investors at the time of the IPO.”

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GM Financial Completes Acquisition of Ally’s International Operations

FORT WORTH, Texas — General Motors Financial Company, Inc., has announced that on Jan. 2, GM Financial, GMAC UK plc — an indirect wholly-owned subsidiary of GM Financial — and Ally Financial Inc., completed a transaction under which GM Financial and GMAC UK acquired Ally’s 40% equity interest in SAIC-GMAC Automotive Finance Company Limited, a joint venture that conducts auto finance operations in China.

GM Financial acquired a 5% equity interest and GMAC UK acquired a 35% equity interest in the joint venture. Also on January 2, GM Financial sold its 5% equity interest in SAIC-GMAC to Shanghai Automotive Group Finance Company Ltd., a current shareholder of SAIC-GMAC. As a result of these equity transfers, SAIC-GMAC is now jointly owned by SAIC FC (45%), GMAC UK (35%) and Shanghai General Motors Company Limited (20%). SGM is a joint venture between Shanghai Automotive Industry Corporation (50%) and GM (50%). GM contributed $700 million in equity to GM Financial to facilitate this acquisition.

“The close of the joint venture in China completes our acquisition of Ally’s international operations that began in November 2012. This is an important step in our evolution as GM’s global captive finance company and in supporting its growth strategy. China is a significant market for GM and we want to ensure the availability of competitive financing for its customers and dealers,” said President and CEO Dan Berce.

The company previously completed the acquisition of Ally’s international operations in Europe and Latin America in 2013.

GM Financial now has operations in 19 countries, serving more than 16,000 dealers and providing auto finance products in markets that cover over 80% of GM’s worldwide sales.

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GM Increases GM Financial’s Credit Line

DETROIT — General Motors Co. today increased its financial support of General Motors Financial Co. (GM Financial), providing the captive finance company with a new $1 billion line of credit.

The new support agreement replaces an existing $600 million credit line. It also provides that GM will use commercially reasonable efforts to ensure that GM Financial will continue to be designated as a subsidiary borrower on up to $4 billion of GM’s corporate revolving line of credit.

“GM Financial is a core component of GM’s business and this agreement will strengthen its capability to support GM’s strategy,” said GM President Dan Ammann.

As of June 30, GM Financial had total available liquidity of $4.8 billion, consisting of $1.4 billion of unrestricted cash, $1.8 billion of borrowing captivity on unpledged eligible assets, $990 million of borrowing capacity on unsecured lines of credit and GM’s $600 million credit facility.

Since being acquired by GM in 2010, GM Financial has significantly increased its share of GM’s business, which now represents 75% of GM Financial’s consumer loan and lease originations. The new credit line comes at a time when the captive finance company is expanding its product offerings, including the rollout of a prime lending program to GM dealers during the second quarter, and operations into International markets.

“With the acquisition of the international business, the growth in our North America product portfolio and the diversity of our funding platform, we are well positioned to support GM as its captive auto finance company,” GM Financial President and CEO Dan Berce stated in a company press release. “The support agreement represents the next step in the evolution of GM Financial and further cements our position as GM’s captive.”

The support agreement has been filed by GM Financial on Form 8-K with the United States Securities and Exchange Commission.

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Compliance, Technology to Headline Vehicle Finance Conference

Washington — Thought leaders from across the vehicle finance industry will share their expertise at the American Financial Services Association (AFSA)’s 18th Annual Vehicle Finance Conference and Exposition, scheduled for Jan. 22-24, 2014, at the Sheraton in New Orleans. This year’s theme is “Navigating the New Normal.”

The conference will kick off with a macro-level examination of industry trends by John Gray, president, of Experian Automotive, Michael Buckingham, senior director of automotive finance for J.D. Power & Associates and Sarah Watt House, economist for Wells Fargo Securities LLC. Experts from research, strategy and vehicle finance firms will also delve into technology innovations, how to connect with younger generations, relationship management and risk management.

Bob Lutz, retired vice chairman of General Motors, will be at the conference to share key lessons he learned over his 47-year career. He will also identify best practices during his keynote address.

The conference will feature Patrice Ficklin, assistant director for the Consumer Financial Protection Bureau (CFPB)’s Office of Fair Lending. She will discuss the bureau’s approach to regulation and compliance based on the fair lending bulletin it issued in March 2013.

The conference will also feature a candid panel discussion among vehicle finance CEOs. Feature participants will include Daniel Berce, president and CEO of GM Financial, Thasunda Brown Duckett, CEO of Chase Auto Finance and Mike Groff, president and CEO of Toyota Financial Services. In addition, four leaders from the National Automobile Dealers Association (NADA) will share the dealer perspective in the “Top Issues for Dealers in 2014” session.

The conference will close with a look forward from Sheryl Connelly, Global Consumer Trends and Futuring Manager for Ford Motor Co. She will discuss probable shifts in consumer values, attitudes and behaviors.

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GM Financial Prepares for ‘CFPB Exam’

Fort Worth, Texas — During its quarterly investor call on July 25, General Motors Financial Co. (GM Financial) announced earnings of $178 million for the second quarter of 2013, compared to $137 million in the same period last year. Officials also commented on the company’s planned roll out of a prime product, its acquisition of Ally Financial’s International business units and the Consumer Financial Protection Bureau (CFPB)’s expected impact on auto finance.

Loan originations for the captive finance company were at $3.3 billion for the quarter, with North America at $2.2 billion and the company’s international business at $1.1 billion. Officials said the company closed a significant portion of its acquisition of Ally Financial’s international assets during the quarter, including Mexico, Chile, Colombia, and its European operations.

“With the international acquisition, our business has moved significantly in the direction of being a true captive finance company,” said Dan Berce, president and CEO, GM Financial.

Upon the completion of the international acquisition, GM Financial will be in 19 countries, servicing more than 9,000 dealers, with earning assets of more than $30 billion and a footprint that covers 80 percent of the sales territories for GM.

Officials also reported that accounts 31 to 60 days and more than 60 days delinquent accounted for 5.3 and 1.8 percent, respectively, of the company’s portfolio in the quarter ending June 30. Berce said the company is seeing typical seasonal trends, with March and June quarters being the strongest and September and December being weaker.

The company has also beefed up its compliance efforts in anticipation of an “inevitable CFPB exam.”

“A few areas the CFPB is focusing on are consumer complaints and third-party vendor management,” Berce said. “We have refocused on each of those areas, like every other consumer finance company.

“The auto-finance specific, probably the area that the CFPB has its sights on the most is the payment rate participation to dealers when we source business,” Berce added. “I think the CFPB, if it were up to them, they would rather see flat rates, flat payments to dealers for sourcing business rather than a rate participation. It remains to be seen how that shakes out, but I don’t think it will have much of an impact on our economics, whether we pay flat or participation. The whole industry will change together, if that’s the way the cards fall.”

In its last quarterly investor call, GM Financial said it expects to roll out a prime product in early 2014. Plans for the rollout are still on track for first quarter of 2014.

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