This time next year, Ally Financial’s U.S. auto franchise will dominate the company’s profile, according to executives.
“Ally has basically transformed itself from a captive to a successful, market-driven competitor,” said Ally CEO Michael Carpenter during the company’s 2Q12 earnings call.
Ally reported that its U.S. auto originations last quarter totalled $10.5 billion, up from $9.5 billion in 2Q11. Of the total, retail new-car loans accounted for $5.9 billion, retail used-car loans accounted for $2.6 billion, and leases accounted for $2.1 billion, according to the company’s earnings statement.
Ally’s North American Automotive Finance segment, including Canada, reported a pre-tax income for 2Q12 of $631 million, up from $559 million in 2Q11. Auto originations were reported at $11.7 billion, up from $10.3 billion in 2Q11, driven by higher industry sales and growth in the used and diversified channels.
On the call, Carpenter noted that agreements for subvented loans for Chrysler and GM will expire in April and December 2013, respectively, but the company is “well positioned” for that time, he said, noting that GM and Chrysler retail subvented contracts comprise only 18% of its 2Q12 auto earning asset mix.
“That isn’t to say that the relationships with the OEMs aren’t important,” he said. “They no longer define us or constraining our potential.”
Carpenter explained that Ally’s competitive offerings of a variety of products puts them “head-to-head” in the marketplace among all other competitors. “We are diversified across brands dealer brands, dealer relationships and the credit spectrum,” he said.
As a whole, Ally reported a net loss of $898 million for 2Q12, compared with net income of $310 million in 1Q12 and net income of $113 million for 2Q11. The company reported a core pre-tax loss of $753 million for the second quarter of 2012, compared to core pre-tax income of $474 million in the prior quarter and $465 million in the comparable prior year period.
Results for the quarter were adversely affected by a $1.2 billion charge resulting from Residential Capital LLC, and certain of its subsidiaries filing for Chapter 11 bankruptcy protection on May 14 and a proposed settlement between ResCap and Ally, as previously announced. Also, as a result of the bankruptcy, ResCap was deconsolidated from Ally's financial statements, the company said in a statement.