GM Deal With Wells Fargo Poses Another Threat To Ally

General Motors Co. (GM) said Thursday it signed a deal to offer dealer and consumer financing through Wells Fargo & Co. (WFC) in GM's U.S. Western region, another potential threat for Ally Financial Inc.

Ally, formerly GMAC LLC, used to be the in-house financing arm for GM and is currently the largest provider of loans for the auto maker's customers. It has a partnership to provide incentive loans to GM customers that expires next year.

GM's "long-term partnership" with Wells Fargo will include incentivized loan programs and non-incentive retail loans for customers, floor-plan and other financing for dealers, treasury services and insurance, GM said.

The deal will "fuel growth in our auto finance business, an area in which we are looking to expand," Tom Wolfe, head of Wells Fargo consumer credit solutions, said in a press release.

GM said the deal will complement its "extensive relationship with Ally," a leasing program with U.S. Bancorp (USB), and its in-house offerings through GM Financial, the unit it created after acquiring subprime lender AmeriCredit Corp. in 2010.

Ally signed a deal with GM in 2006 under which the auto maker would use Ally exclusively for incentive loans and leasing to customers. The agreement was changed in 2009, giving GM the ability to offer incentive financing through other lenders starting in 2011. That agreement runs through 2013.

Under incentive loan programs, dealers can offer discounted rates on loans as a way to attract buyers.

The volume of auto loans Ally made under incentive programs through its preferred partners has shrunk in recent years, but still accounted for 36% of its new loans and leases in North America in 2011, according to its most recent annual report.

"Ally remains an important business partner to GM and its dealers," said Jim Cain, a spokesman for GM. He declined to say what GM plans to do after its existing agreement with Ally expires.

GM worked with Wells Fargo on a trial last year before deciding to form a more official agreement, Cain said.

A spokeswoman for San Francisco-based Wells Fargo did not immediately respond to requests for comment Thursday.

An Ally spokeswoman said it "remains the leading finance provider for GM vehicle sales."

"We value the business from GM and their dealers," she said, adding that Ally has been "growing and diversifying our business over time and supporting a broader network of products and brands."

GM in 2006 sold a majority stake in Ally Financial, which is now 74% owned by the U.S. government after taking a bailout during the financial crisis.

News of Wells Fargo's deal with GM comes as the fate of another of Ally's preferred lending partnerships is in question.

Chrysler Group LLC has been talking to several banks about forming a new financing venture, the Wall Street Journal reported last month.

Ally has an agreement with Chrysler that extends through April 30, 2013, to provide financing to the auto maker's dealers in the U.S., Canada, Mexico and other regions to buy inventory. Chrysler also is required to reserve for Ally a certain portion of incentivized financing to car buyers.

A spokesman for Chrysler declined to comment Wednesday about its contract with Ally but said it is talking to a number of financial institutions regarding different options.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com

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