On the Call: Ally Financial CEO says ‘there are risks we will not take’ in auto financing

On the Call: What AmeriCredit means for Ally

Consumer finance company Ally Financial Inc. has long been the lender-of-choice for General Motors Co. But in recent months, GM has said it wants to do more business with customers that have lower credit scores. The automaker views this group as underserved and an important source of business as it prepares for its initial public offering.

Last month, GM said it would buy AmeriCredit Inc., a Fort Worth, Texas-based company that specializes in lending to so-called subprime customers.

During a conference call with investors, Ally Financial CEO Michael Carpenter was asked about the impact of the acquisition on Ally’s business.

CARPENTER: Since the industrial revolution, you don’t have to own the cow to get the milk. Now, GM’s agenda is to sell cars. Their margins on selling a car of almost any type is about 10 times our margin. Therefore, they can take more risk than we can take, whether it is in regard to credit risk or residual risk.

So AmeriCredit — which obviously has a strong subprime basis, and I would assume would extend into the leasing segment — becomes a captive vehicle to fill that gap over time.

We are very comfortable with our participation in subprime. We are very comfortable without participation in leasing. But there are risks we will not take which, as a manufacturer, you may wish to take.