Ally Bank 2014 Annual Report Download - page 24

Table of Contents
Ally Financial Inc. • Form 10-K
12
Ally Financial Inc. may be limited in its ability to receive distributions from its subsidiaries.
Regulatory and other legal restrictions may limit the ability of Ally Financial Inc.’s subsidiaries to transfer funds freely to Ally Financial
Inc. In particular, many of Ally Financial Inc.’s subsidiaries are subject to laws, regulations, and rules that authorize regulatory bodies to block
or reduce the flow of funds to it or that prohibit such transfers entirely in certain circumstances. These laws, regulations, and rules may hinder
Ally Financial Inc.’s ability to access funds that it may need to make payments on its obligations in the future. Furthermore, as a BHC, Ally
Financial Inc. may become subject to a prohibition or to limitations on its ability to pay dividends. The bank regulators have the authority and,
under certain circumstances, the duty to prohibit or to limit payment of dividends by the banking organizations they supervise, including Ally
Financial Inc. and its subsidiaries.
Risks Related to Our Business
Our business and results of operations are highly dependent upon overall U.S. automotive industry sales volume.
Our business and results of operation are highly sensitive to sales volume for new and used vehicles. Vehicle sales are impacted by
several economic and market conditions, including employment levels, credit availability, fuel costs, and overall economic conditions. For
example, new vehicle sales decreased dramatically during the economic crisis that began in 2008, and did not rebound significantly until
2012-13. Any future declines in new and used vehicle sales could have a material adverse effect on our business and profitability.
The profitability and financial condition of our operations are heavily dependent upon GM and Chrysler.
GM and Chrysler dealers and their retail customers compose a significant portion of our customer base, and our Dealer Financial
Services operations are highly dependent on GM and Chrysler production and sales volume. In 2014, 61% of our U.S. new vehicle dealer
inventory financing and 70% of our U.S. new vehicle consumer automotive financing volume were for GM franchised dealers and customers,
and 28% of our U.S. new vehicle dealer inventory financing and 17% of our U.S. new vehicle consumer automotive financing volume were
for Chrysler dealers and customers.
We were previously party to separate agreements with both GM and Chrysler that provided for certain exclusivity privileges related to
subvention programs that they offered. Our agreement with Chrysler expired in April 2013. In addition, our agreement with GM expired
effective February 28, 2014. These agreements, which provided us with certain preferred provider benefits, including limiting the use of other
financing providers by GM and Chrysler for their incentive programs, have expired.
GM informed its dealers in early January 2015 that it intends to provide lease subvention programs for Buick, GMC, and Cadillac
products exclusively through its wholly-owned subsidiary, General Motors Financial Company, Inc. (GMF). Further, GM informed us on
February 27, 2015 that they also intend to provide lease subvention programs for Chevrolet exclusively through GMF. Ally's total originations
during 2014 of $41.0 billion included approximately $9.3 billion of GM lease originations and approximately $4.0 billion of GM subvented
loan originations. Buick, GMC, Cadillac, and Chevrolet leases combined accounted for approximately 23% of Ally’s total originations during
2014. If we are unable to successfully offset these declines in our business, these actions could have a material adverse effect on our business
and results of operations over time.
Other automotive manufacturers could utilize other existing companies, including their own captives, to support their financing needs
including offering products or terms that we would not or could not offer, which could have a material adverse impact on our business and
operations. Furthermore, other automotive manufacturers could expand or establish or acquire captive finance companies to support their
financing needs thus reducing their need for our services.
A significant adverse change in GM’s or Chrysler’s business, including the production or sale of GM or Chrysler vehicles; the quality or
resale value of GM or Chrysler vehicles; the use of GM or Chrysler marketing incentives; GM’s or Chrysler’s relationships with its key
suppliers; vehicle recalls; or GM’s or Chrysler’s relationship with the United Auto Workers and other labor unions and other factors impacting
GM or Chrysler or their respective employees, or significant adverse changes in their respective liquidity position and access to the capital
markets; could have a material adverse effect on our profitability and financial condition.
There is no assurance that the automotive market or GM’s and Chrysler’s respective share of that market will not suffer downturns in the
future, and any negative impact could in turn have a material adverse effect on our business, results of operations, and financial position.
Our inability to maintain relationships with dealers could have an adverse effect on our business, results of operations, and financial
condition.
Our business depends on the continuation of our relationships with our customers, particularly the automotive dealers with whom we do
business. While the number of dealers that we have retail relationships with increased during 2014, the number of dealers that we have
wholesale relationships with decreased approximately 2% as compared to December 31, 2013. Further, our share of GM commercial
wholesale financing decreased from 71% in 2012 to 64% in 2014, and our share of Chrysler commercial wholesale financing decreased from
58% in 2012 to 45% in 2014. If we are not able to maintain existing relationships with key automotive dealers or if we are not able to develop
new relationships for any reason, including if we are not able to provide services on a timely basis or offer products that meet the needs of the
dealers, this trend related to wholesale funding may continue, and the number dealers with which we have retail funding relationships could
also decline in the future. As a result, our business, results of operations, and financial condition could be adversely affected in the future.