Ally Bank 2011 Annual Report Download - page 86

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
future (typically between two and four years) based on current assumptions for the respective make and model. Actual realized values often
differ.
• Remarketing abilities — Our ability to efficiently process and effectively market off−lease vehicles affects the disposal costs and the proceeds
realized from vehicle sales.
• Manufacturer vehicle and marketing programs — Automotive manufacturers influence lease residual results in the following ways:
æ The brand image of automotive manufacturers and consumer demand for their products affect residual risk.
æ Automotive manufacturer marketing programs may influence the used vehicle market for those vehicles through programs such as
incentives on new vehicles, programs designed to encourage lessees to terminate their leases early in conjunction with the acquisition of a
new vehicle (referred to as pull−ahead programs), and special rate used vehicle programs.
æ Automotive manufacturers may provide support to us for certain residual deficiencies.
The following table summarizes the volume of serviced lease terminations in the United States over recent periods. It also summarizes the average
sales proceeds on 24−, 36−, and 48−month scheduled lease terminations for those same periods at auction. The mix of terminated vehicles in 2011 was used
to normalize results over previous periods to more clearly demonstrate market pricing trends.
Year ended December 31, 2011 2010 2009
Off−lease vehicles remarketed (in units) 248,624 376,203 369,981
Sales proceeds on scheduled lease terminations ($ per unit)
24−month (a) n/m n/m n/m
36−month $ 20,157 $ 19,061 $ 16,958
48−month 16,106 14,908 12,611
n/m = not meaningful
(a) During 2011, 24−month lease terminations were not materially sufficient to create an historical multi−year comparison from that term due to our temporary curtailment of leasing in
late 2008 through 2009.
The number of off−lease vehicles marketed in 2011 declined 34% from 2010. The decrease was due to our temporary curtailment of leasing in late
2008 through 2009. Proceeds increased from 2009 as market conditions for pricing of used vehicles improved. The improvement in proceeds was driven
primarily by lower used vehicle supply, large decreases in new vehicle sales and leasing activity after the 2008 economic downturn, and subsequent
corporate restructurings in the automotive industry. For information on our Investment in Operating Leases, refer to Note 1 and Note 10 to the Consolidated
Financial Statements.
Country Risk
We have exposures to obligors domiciled in foreign countries; and therefore, our portfolio is subject to country risk. Country risk is the risk that
conditions in a foreign country will impair the value of our assets, restrict our ability to repatriate equity or profits, or adversely impact the ability of the
guarantor to uphold their obligations to us. Country risk includes risks arising from the economic, political, and social conditions prevalent in a country, as
well as the strengths and weaknesses in the legal and regulatory framework. These conditions may have potentially favorable or unfavorable consequences
for our investments in a particular country.
Country risk is measured by determining our cross−border outstandings in accordance with Federal Financial Institutions Examination Council
guidelines. Cross−border outstandings are reported as assets within the country of which the obligor or guarantor resides. Furthermore, outstandings backed
by tangible collateral are reflected under the country in which the collateral is held. For securities received as collateral, cross−border outstandings are
assigned to the domicile of the issuer of the securities. Resale agreements are presented based on the domicile of the counterparty.
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