Automotive News reported that in a mirror image of sorts, a new Ally Financial is emerging this year, too. The new Ally is smaller and its auto finance and insurance operation is now limited to the United States. It also has a strong online consumer banking business.
In many ways, the two financial institutions have traded places. GM Financial, a one-time niche player in auto finance, has evolved into a globe-circling behemoth. Ally Financial, which as GMAC was once so large that the U.S. government felt compelled to rescue it rather than let it fail, today is a much smaller operation.
The new Ally Financial, formerly known as GMAC Financial Services, has shrunk. Besides selling off its International Operations, Ally also shed its giant mortgage subsidiary, Residential Capital, a once-thriving business that almost pulled GMAC down with it into bankruptcy.
In 2006, GM sold majority control of GMAC but retained a minority share. Falling auto sales, the credit crisis and the collapse of subprime mortgages leading up to the recession forced GMAC into needing a U.S. government bailout in late 2008.
Ally allowed its ResCap unit to file for bankruptcy protection in 2012, but the ResCap bankruptcy plan wasn’t approved in U.S. Bankruptcy Court until December 2013. The court’s ruling finally left Ally free of its legacy obligations to ResCap, the company said.
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