Ever since GMAC became a majority-owned unit of Cerberus Capital Management in 2006, industry players have questioned whether the mega-financier would reestablish its position as the captive finance company for General Motors.
GMAC CEO Michael Carpenter addressed that issue during the Q&A portion of the company’s first-quarter earnings call earlier this week. Here’s the exchange:
Doug Karson - Bank of America - Analyst
Next, and my final question, because I get a lot of this from investors to cover both GM and GMAC, looking across the auto industry most finance companies are kind of aligned with their auto counterpart and they have been for many years before the separation. Is there any thoughts internally that you could share with us at this time about potentially remerging those businesses?
I know that is a very big question.
Michael Carpenter - GMAC Financial Services - CEO
Well, let's come at a somewhat different way which is we believe that over -- first of all, we have a very, very strong working relationship with GM. As you can see in the [deck] we continue to gain share in the dealer channel on the retail side of the business. We have been very active on new lease products in the last quarter and so the relationship is very strong and the momentum in the marketplace is very strong also.
Now when you look at the captive model it's kind of interesting because if you look at where we are not necessarily today, but where we could be in the relatively near future, we could, as an organization, have a substantially lower cost of capital than an integrated auto manufacturer/finance company could hope to have.
So I think you have to kind of look at it the other way around and say does it really make a lot of sense for an auto company to put $100 million of assets on its balance sheet to finance dealers and end customers when it's being done perfectly well already. And secondly, when the implication of that would be that they would not be able to own a bank and the potential cost of funds advantage of owning a bank is very substantial.
And so I would almost turn it the other way around and say is it possible to over time those manufacturers that have an integrated finance company would actually consider going in the other direction because of the advantages that we potentially have over time.
for the full transcript.