* Ally finalizes sale to raise funds for bailout repayments
* GM CFO Ammann says no need for more acquisitions for auto
* Ammann says captive finance arm boosted N. America sales
* GM Financial will expand to Russia, Australia, Argentina
* Sees no need to expand N. American auto finance
Nov 21 General Motors' financing arm GM
Financial has agreed to pay about $4.2 billion for the European
and Latin American auto lending operations of Ally Financial, as
it looks to extend its in-house financing to boost sales.
Ally, which is 74 percent owned by the U.S. government,
announced the plan to sell its international operations in May,
in an effort to speed up the repayment of bailout funds. The
company is focusing on its U.S. business and has already sold
operations in Canada and Mexico.
GM said the purchase should increase its sales in Europe and
Latin America, reflecting its experience in North America after
it returned to in-house financing with the creation of GM
Financial in 2010.
GM is also still partially owned by the U.S. government
after a series of bailouts during the financial crisis and the
companies also have an intertwined history: Ally is the former
financing arm of GM and was once known as GMAC.
The automaker has been gradually rebuilding its finance
operations since selling a controlling stake in GMAC to private
equity firm Cerberus Capital Management in 2006.
"We're bringing those parts of Ally back into the family,"
said Dan Ammann, GM's chief financial officer, on a conference
call with reporters.
Ammann said that GM has realized about 200,000 additional
auto sales in North America since it created GM Financial.
In-house financing helps auto sales by allowing carmakers to
subsidize auto loans, leases and dealership upgrades.
Ammann said he expects to increase sales by varying degrees
in other markets around the world, but he declined to detail any
GM wanted to expand its in-house financing profile in order
to deepen the relationship the company has with customers beyond
the initial sale, where it had lost opportunities in recent
years, he said.
NO NEED FOR U.S. GOVERNMENT OK
Ammann said the deal had been approved by the GM board of
directors but did not have to be approved by the U.S.
The transaction includes operations in Brazil, Mexico,
Colombia, Chile, Germany, Britain, France, Italy, Belgium, the
Netherlands, Sweden, Switzerland and Austria. It also includes
Ally's 40 percent interest in its Chinese joint venture
GMAC-SAIC Automotive Finance Company, GM said.
GM Financial will work to expand its international finance
operations into markets where Ally has pulled back, including
Russia, Australia and Argentina, Ammann said. This expansion
will be done "organically" and not by acquisitions, he said.
Ammann said there is no need to expand its finance activities
in North America.
The deal is expected to add $300 million to $400 million to
GM Financial's annual earnings before taxes.
GM expects to contribute about $2 billion in cash to GM
Financial to fund the purchase, the automaker said in a separate
The U.S. automaker bought AmeriCredit Corp in 2010 and in
August disclosed it was among the bidders for Ally's
international operations. GM and Cerberus remain Ally
Ally said its combined operations in Europe and Latin
America represented about $16.1 billion in assets at the end of
the third quarter.
Of the $17 billion it owes the U.S. government, Ally has
paid back $5.8 billion, including dividend payments.
The company is focusing on U.S auto lending and banking to
turn its business around. In May, its Residential Capital
(ResCap) mortgage unit filed for bankruptcy, and on Wednesday a
bankruptcy court judge approved the sale of its mortgage
operations to Ocwen Financial Corp and Walter Investment
Management Corp for $3 billion.
ResCap is also selling a loan portfolio to Warren Buffett's
Berkshire Hathaway Inc for $1.5 billion. [ID:
Ally agreed to sell its Canadian auto finance and deposit
business to Royal Bank of Canada for $4.1 billion
and its Mexican insurance unit to ACE Ltd for $865
million last month.