Ally Financial, the former GMAC Inc., is a global finance company specializing in automotive, real estate finance and commercial finance, insurance, and online banking. GMAC had been short for its former name, General Motors Acceptance Corp. and the company was once the financing arm of the Detroit automaker, which is still a co-owner, along with Cerberus Capital Management LP. The lender, battered by persistent weakness in the housing and auto markets, became a bank-holding company to get a bailout from the U.S. Treasury in 2008. Uncle Sam owns 56% of the company. The rest is controlled by GM, Cerberus, other investors and a trust holding GM's former equity.
The company ran into trouble in 2008, as the housing crisis dragged down its mortgage business, Residential Capital LLC, or ResCap, a subprime lender. It also suffered losses from auto loans. ResCap has been walled off from the rest of the company, and a strategic plan for it is in the works which might include a separate bankruptcy proceeding or a sale. The company is also selling some of its mortgage assets.
Ally renamed itself to distance itself from ailing General Motors. It began with rebranding GMAC Bank unit as Ally Bank, which is using its new access to low-cost capital to compete more directly with banks. Following the bankruptcy filing of automaker Chrysler LLC, the company took over Chrysler Financial's loan portfolio and dealer financing in 2009. As a government-sanctioned financier of GM and Chrysler vehicles, the company is vital to federal efforts to resuscitate the ailing auto makers.
Churn at the top has been complicating the turnaround. Chief executive Alvaro G. de Molina, the former chief financial officer for Bank of America Corp. for 17 years, resigned after just 19 months. The CFO also recently announced plans to leave. New York investor J. Ezra Merkin had been GMAC's chairman but resigned after coming into the spotlight for his investments with Ponzi-schemer Bernard Madoff. The company plans an IPO in the next two years, eventually repaying its rescue aid and exiting from government ownership. It has been readying its commercial insurance unit for a potential sale. Meantime, GM might start up its own captive financing operation.
Ally Financial is undergoing a culture change as it shifts away from its relationship with former parent GM. As GMAC, it had focused heavily on making GM happy but is now looking to steal market share from banks, credit unions and captive lenders of other auto makers. It is also looking to change the way its loan officers are motivated. Instead of paying hundreds of officers a salary, the executives will now be paid in part by commission. One perk that's staying around: GM Family First benefits, extended to all employees, which includes General Motors vehicle discount pricing for family and friends.