America's Biggest Car Finance Provider Shows Positive Results
Signs of recovery in the US car industry continue after the country's biggest provider of car finance, Ally Financial Inc. announced that it had moved into profit for the final quarter of 2012. The giant US auto lender reported net income of $1.4 billion in comparison with a loss of some $206 million for the same period in 2011.
Signs of recovery in the US car industry continue after the country's biggest provider of car finance, Ally Financial Inc. announced that it had moved into profit for the final quarter of 2012. The giant US auto lender reported net income of $1.4 billion in comparison with a loss of some $206 million for the same period in 2011. In a statement released on February 5th the Detroit company went on to confirm that core pre-tax income was up to $19 million in the quarter, against a loss of $172 million for the last quarter of 2011. The announcement is also good news for American tax payers who now own 74% of Ally after the company received a federal bailout of $17.2 billion during the recent credit crisis.
Ally is now preparing to repay that money by selling non-core assets and Chief Executive Officer, Michael Carpenter, has confirmed that that the lender will now be refocusing on its core businesses of car loans and retail banking in the US. The CEO is also battling to insulate the company against claims caused by the bankruptcy of its residential capital business which went bust during the credit crunch due to huge losses on subprime mortgages. As part of its refocus, Ally has agreed to sell its international auto finance business to fellow Detroit giant, GM, for $4.2 billion. GM did in fact own the company, which was previously known as GMAC inc. until it sold off 51% of the business in 2006. Although the company still has some way to go to full recovery, Carpenter is bullish about the future on the back of the best car sales figures in the last quarter since the economic crisis started to bite in 2008.
As part of the recovery plan and to provide capital to repay the US government, the CEO plans to hold an initial public offering (IPO) to sell shares in the company. This process has been put on indefinite hold though, until the situation surrounding claims against its bankrupt residential capital business, ResCap, has been resolved. The auto lending industry in the US is not standing still however while Ally sorts itself out. Wells Fargo & Co which is the fourth largest bank in the US by assets and also the biggest in domestic mortgages, is challenging for Ally's number one spot in auto financing. It claims data from at least one organisation is showing that Wells Fargo gained 5.9% of the market in the third quarter of 2012 against Ally's share of 5.5%.
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