Plenty of us have bought cars using GMAC, the financial services arm of General Motors. It's been issuing loans since 1919, nearly as long as GM has been in existence, and its full name is General Motors Acceptance Corporation. But that's all about to change. From August 2010, GMAC will take one more crucial step away from its former parent company and change its name to Ally Financial.
There are several reasons behind the move. First, and perhaps most importantly, GMAC's image took a big dent during the recession, receiving more than $16 billion in bailout money from the U.S. government – now its majority owner. A fresh name will help the company, one of the largest of its kind in the auto industry, to build a new reputation.
Another reason is that GM sold GMAC to Cerberus Capital Management (one-time owners of Chrysler) in 2006. When Chrysler filed for bankruptcy in 2009, Cerberus announced GMAC as the financing source for Chrysler vehicles, a position it has held ever since.
According to the Wall Street Journal, relations between GM and GMAC have been souring. The Journal reports that GM is in talks with financial institutions to broaden the availability of auto loans, opening up the possibility of using firms other than Ally for its financial services. For Ally's part, it no longer provides financing exclusively for GM-branded vehicles. Nonetheless, it remains headquartered in Detroit's Renaissance Center, a complex shared with the General.
And Ally remains a huge resource for GM. It financed more than a third of all GM customers through March 2010 and finances nearly 90 percent of inventory in dealerships selling GM brands. In addition to strong ties with this automaker and Chrysler, Ally also provides loans for Suzuki and Saab (both linked to GM through partnerships and platform sharing).
Despite the name change, Ally Financial says there will be no interruption of service or changes to customer accounts.