Ally Bank 2011 Annual Report Download - page 50

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
Under what we refer to as GM−sponsored pull−ahead programs, consumers may be encouraged to terminate leases early in conjunction with the
acquisition of a new GM vehicle. As part of these programs, we waive all or a portion of the customer's remaining payment obligation. Under most
programs, GM compensates us for a portion of the foregone revenue from the waived payments partially offset to the extent that our remarketing sales
proceeds are higher than otherwise would be realized if the vehicle had been remarketed at lease contract maturity.
On November 30, 2006, and in connection with the sale by GM of a 51% interest in Ally, GM and Ally entered into several service agreements that
codified the mutually beneficial historic relationship between the companies. One such agreement was the United States Consumer Financing Services
Agreement (the Financing Services Agreement). The Financing Services Agreement, among other things, provided that subject to certain conditions and
limitations, whenever GM offers vehicle financing and leasing incentives to customers (e.g., lower interest rates than market rates), it would do so
exclusively through Ally. This requirement was effective through November 2016, and in consideration for this, Ally paid to GM an annual exclusivity fee
and was required to meet certain targets with respect to consumer retail and lease financings of new GM vehicles.
Effective December 29, 2008, and in connection with the approval of our application to become a bank holding company, GM and Ally modified
certain terms and conditions of the Financing Services Agreement. Certain of these amendments include the following: (1) for a two−year period, GM can
offer retail financing incentive programs through a third−party financing source under certain specified circumstances and, in some cases, subject to the
limitation that pricing offered by the third party meets certain restrictions, and after the two−year period GM can offer any such incentive programs on a
graduated basis through third parties on a nonexclusive, side−by−side basis with Ally, provided that the pricing of such third parties meets certain
requirements; (2) Ally will have no obligation to provide operating lease financing products; and (3) Ally will have no targets against which it could be
assessed penalties. The modified Financing Services Agreement will expire on December 31, 2013. After December 31, 2013, GM will have the right to
offer retail financing incentive programs through any third−party financing source, including Ally, without restrictions or limitations. A primary objective of
the Financing Services Agreement continues to be supporting distribution and marketing of GM products.
On August 6, 2010, we entered into an agreement with Chrysler to be the preferred provider of financial services for Chrysler vehicles. The agreement
replaced and superseded the legally binding term sheet that we entered into with Chrysler on April 30, 2009, which contemplated this definitive agreement.
We provide retail financing to Chrysler dealers and customers as we deem appropriate according to our credit policies and in our sole discretion. Chrysler is
obligated to provide us with certain exclusivity privileges including the use of Ally for designated minimum threshold percentages of certain of Chrysler's
retail financing subvention programs. The agreement extends through April 30, 2013, with automatic one−year renewals unless either we or Chrysler
provides sufficient notice of nonrenewal. As a result, our agreement with Chrysler will be automatically extended through April 30, 2014, unless Chrysler
notifies us of nonrenewal on or before April 30, 2012, in which case, the agreement would expire on April 30, 2013.
The following table presents the percentage of retail and lease contracts acquired by us that included rate support from GM.
Year ended December 31, 2011 2010 2009
GM subvented volume in North America
As % of GM North American new retail and lease volume acquired by Ally 53% 51% 69%
As % of total North American new and used retail and lease volume acquired by Ally 25% 27% 48%
GM subvented International (excluding China) volume (a)
As % of GM International new retail and lease volume acquired by Ally 68% 55% 67%
As % of total International new and used retail and lease volume acquired by Ally 61% 50% 61%
GM subvented volume in China (b)
As % of GM China new retail and lease volume acquired by Ally 12% 14% 1%
As % of total China new and used retail and lease volume acquired by Ally 7% 8% 1%
(a) Represents subvention for continuing operations only.
(b) Represents vehicles financed through our joint venture GMAC−SAIC. We own 40% of GMAC−SAIC alongside Shanghai Automotive Group Finance Company LTD and Shanghai
General Motors Corporation LTD.
The following table presents the percentage of Chrysler subvented retail and lease volume acquired by Ally.
Year ended December 31, 2011 2010 2009
Chrysler subvented volume in North America
As % of Chrysler North American new retail and lease volume acquired by Ally 52% 57% 39%
As % of total North American new and used retail and lease volume acquired by Ally 10% 14% 4%
At December 31, 2011, the percentage of North American new retail contracts acquired that included rate subvention from GM increased compared to
2010 primarily due to increases in manufacturer marketing incentives during the first half of 2011. International retail contracts acquired that included rate
and residual subvention increased as a result of aggressive GM campaigns in various international markets. North
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