GMAC Aims To Be Lender Of Choice

GMAC Aims To Be Lender Of Choice

Donna Harris Automotive News

Alvaro de Molina, CEO of GMAC Financial Services, has a big vision for transforming GMAC into a bank.  De Molina intends to take back GMAC’s long-held first-place title from Chase Auto Finance, currently the nation’s highest-volume automotive retail lender.  He also plans to provide retail and commercial financing to dealers of all makes.

And he wants to enter the direct-to-consumer lending business — eventually turning Ally Bank, GMAC’s newly created Internet subsidiary, into a bricks-and-mortar operation.  De Molina says he’ll take on Chase and other large banks that have partnerships with automakers to provide financial services to dealers. The new alliance with Chrysler Group is just the beginning, he says.  “We want 100 percent of the automotive business,” de Molina says. “We want to be the finance company of choice.”

But that mission is especially tough for a company on the government dole. GMAC has received $12.5 billion in federal aid and may need up to $5.6 billion more to ensure its stability during a prolonged recession, according to the government.  “The long-term challenge is extracting GMAC from government ownership and support,” says Mark Wasden, a senior analyst with Moody’s Investors Service. “GMAC will have to do an initial public offering, something to repay the government.”

De Molina, with his refined, dark features and polished speaking voice, exudes the poise and confidence that come from a long career as a top banking executive.  The Cuba-born de Molina, 52, joined Cerberus Capital Management in June 2007 after 17 years at Bank of America that included a stint as CFO. He became CEO of GMAC in April 2008 and was appointed to the GMAC board in March of this year.

De Molina engineered and led the push to convert GMAC into a bank holding company, reasoning GMAC could raise funds through deposits and have access to federal aid programs.

The Federal Reserve Board of Governors approved GMAC’s application last year on Christmas Eve, but the transition to a bank is taking time.   De Molina likens the task to “building a plane while flying it.”  To erect the full-fledged bank that de Molina envisions, analysts say, GMAC must increase deposits substantially at subsidiary Ally Bank and attract private investors while weaning itself from government aid.

Moody’s Wasden says deposits should be 80 percent of assets. But as of the third quarter of this year, Ally’s deposits were 16 percent of assets.  The U.S. Treasury Department is GMAC’s biggest owner with a 35.4 percent stake. Other stakeholders are affiliates of Cerberus with a 22.0 percent share; third-party investors with 18.1 percent; a General Motors Co. trust, 14.6 percent; and GM, 9.9 percent.  Chris Wolfe, managing director for Fitch Ratings, says that to attract private investors, “GMAC must return to profitability and sustain it.” Wolfe says that will mean selling or closing all or part of ResCap, GMAC’s home mortgage business.

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