The former lending arm of General Motors has been edging away from the GMAC name — once short for General Motors Acceptance Corp. — ever since it was spun off from GM in 2006.

It had created Ally Bank as part of its efforts to win deposits from retail-banking customers to provide another source of funding, and changed its corporate name from GMAC earlier this year.

Ally, which is 56% owned by the U.S. Treasury, said the name change for its retail auto lending would not affect services it provides GM and Chrysler buyers.

The company has generated $16 billion in retail auto loans in the U.S., Canada and Mexico so far this year, and it also provides key financing for GM and Chrysler dealers to stock their inventories.

“The move to the Ally name allows us to invest in a brand that we own and can build upon for the long term,” said Ally President Bill Muir in a statement.

GM, the largest automaker in the world without its own financing arm, had considered trying to buy back Ally or set up a new lender ahead of its planned public stock offering later this year.

But with the timing tight, the automaker has settled for now on working with Ally as its main source of customer credit, although it has talked to other banks about expanding subprime lending.

“As we enter an exciting new chapter in GM’s history, Ally remains an important partner and auto-financing provider for GM customers,” said GM Chief Financial Officer Chris Liddell. “We look forward to continuing that relationship.”

Ally said it would continue using GMAC outside North America while it considers alternatives.

BY JUSTIN HYDE
FREE PRESS WASHINGTON STAFF

“I can remember meeting in 2006 in the summer with top management of New Century,” said Mike Calhoun, president of the Center for Responsible Lending, referring to a big subprime lender. “We said all of our data shows these mortgages are not sustainable. And, somewhat to our surprise, they agreed.”

Calhoun said that with Wednesday’s bill signing, the nation has a way to stop such reckless lending.

Oversight Of ‘Shadow Bankers’

The law is designed to protect consumers not only from over-aggressive banks but also mortgage brokers, check-cashers and payday lenders, which were lightly regulated until now. One goal is to bring these so-called “shadow bankers” out into the sunlight.

“More than two-thirds of the subprime lending, for example, in mortgages was done by non-banks,” said White House economic adviser Austan Goolsbee. “There’s going to be consistent regulation applied across everybody. So it doesn’t matter who you are. It matters what you’re doing.”

The law sets up a new bureau within the Federal Reserve to police all kinds of lenders. Unlike bank regulators tasked with multiple responsibilities, this bureau will have just one job: protecting consumers.

“And everybody will know if something’s going wrong. Here’s where you go. You go to the consumer protection agency,” Goolsbee said. “They’re going to have their rear in the seat — the hot seat — to be held accountable.”

Groups like the U.S. Chamber of Commerce warn the law creates uncertainty for businesses, discouraging them from hiring workers. But Obama insists that reputable companies have nothing to fear from the new rules. More than two years ago, Obama argued on the campaign trail that failure to protect consumers ultimately hurts business as pain “trickles up.”

“It’s not anti-market to be for stronger oversight,” Goolsbee said. “The lack of oversight and ripping up rules of the road so people lose trust is bad for business. It led to the crisis. And that has to be changed.”

Car Dealers Excluded

The new law represents the biggest change to financial rules in decades. But it largely excludes one group of lenders: Car dealers fought to be exempt from the new bureau’s oversight, and they won.

“It’s a huge loophole because auto lending is second only to home mortgages and bigger than credit cards,” said Rosemary Shahan, president of a California-based consumer group that specializes in cars and car loans.

She said some of the risky lending practices that plagued the sub-prime mortgage industry can also be found on the nation’s car lots.

“In fact, there are some folks that will tell you that those practices started with auto and spread to home mortgages: The falsified loan applications, getting people into loans they couldn’t afford, securitizing everything and spreading risks throughout the financial system,” Shahan says.

Car dealers aren’t entirely off the hook. The new law gives the Federal Trade Commission additional power to crack down on dealers if it finds unfair practices.

by Scott Horsley

More efficient electronics systems and electrified accessories like power steering, coolant pumps are cutting parasitic losses that put loads on an engine. Other technologies that are seeing increasingly widespread adoption are start-stop systems and smart alternators that charge the battery only during deceleration.

Because of the awareness that electric vehicles will see limited volumes in the near term, even the engines themselves are seeing new efforts to improve efficiency through new combustion technologies and downsizing. Conventional vehicles will also benefit from weight reduction and aerodynamic advances being developed for electrified vehicles.

Automotive News

There are no electronics experts on Toyota Motor Corp.’s seven-member panel and just three on the National Academies’ 12-member panel.

“The outcome and recommendations from these committees will be shaped by who serves on them,” said Joan Claybrook, former head of the National Highway Traffic Safety Administration and president emeritus of Public Citizen, the consumer advocacy group. “There is a real absence of engineering expertise, particularly in this area of electronics.”

The panels were created in response to congressional hearings this spring that focused on why runaway vehicles were on the rise and why the federal government failed to address the problem. Ninety-three people have died in collisions involving the reported sudden, unintended acceleration of Toyota vehicles, according to NHTSA data. More than 10 million of the manufacturer’s vehicles have been recalled.

Former U.S. transportation chief Rodney E. Slater, who chairs Toyota’s panel, defended his appointments, saying he wanted people with experience on similar panels and broad knowledge about automotive technology.

“I was looking for people who have the ability to reach out to other experts and reserve judgment,” Slater said. “I’m proud of this panel. They have a wealth of experience, and we will be seeking out electronics experts and other experts during the course of our work.”

Auto-safety experts fear that conflicts of interests involving four members of the National Academies panel will taint its findings.

Two members with electrical expertise spent most of their engineering careers at Ford Motor Co., which ranks just below Toyota in the incidence of runaway vehicles.

“There are two members for whom we have disclosed conflicts of interest that are unavoidable,” said Stephen R. Godwin, a director with the National Academies’ Transportation Research Board. “You have to understand how the industry operates, and the committee needs to know what questions to ask.”

Watchdog groups are also concerned about a panel member whose son and business partner once worked for Exponent, which has conducted recent research for Toyota. The research rejected electronics and malfunctioning throttles as the cause of sudden acceleration.

The National Academies group removed one panel member, former NHTSA administrator Nicole Nason. Nason led the agency when it was asked to take a more aggressive role with the runaway acceleration but failed to do so.

Godwin said the National Academies group is planning to add three members with electronics expertise but did not say when they would be appointed.

“If the safety community wouldn’t have raised a fuss, would they have agreed to add new people?” said Clarence Ditlow, executive director of the Center for Auto Safety. “If they have three new people from the auto industry, I would find that disappointing.”

The National Academies committee must submit a final report to NHTSA in 18 months.

Slater said the Toyota panel has about a one-year timeline. He said he hopes to consult with the National Academies committee.

By Kimberly Kindy
Washington Post

Interestingly, truck sales contributed significantly to growth in April and the year-to-date. Ford Motor’s US growth of 24.9% last month was due in no small part to a 42% rise in sales of its best-selling F-150 pick-up truck. US light truck sales also outpaced car sales in April, but were still slightly lower for the four-month period at 14.9% compared with 18.4% growth in car sales. This suggests that the ‘gas guzzlers’ may not fall from favour as quickly as expected, particularly if BMI’s forecast for the first year of growth in the construction industry for five years is met.

The underlying strength of the US market and its positive attitude towards foreign investment see it retain first place in BMI’s Business Environment Ratings for the auto industry in the Americas. Although it does not have the growth potential of some of the Latin American markets, it does have a strong regulatory framework and fewer limits on potential returns. The country also scores highly for its regulatory environment, reflecting trade agreements such as North American Free Trade Agreement (NAFTA).

Although General Motors Company (GM) managed to hang on to its lead of the market in 2009 despite a 30% fall in sales, it is now looking much stronger at the top of the table in the first four months of 2010 with sales up 14%. However, the real battle comes behind GM, where Toyota Motor has been ousted by Ford for second place. Ford’s 33% increase in sales in the four months to April have left the company just 1.4% behind GM in terms of market share. Chrysler, while still back in fifth, is looking more competitive since its restructuring, with sales growth of 1.95% for the four months.

On Friday, Toyota Motor Corp. said it would recall a total of 270,000 Lexus and Crown vehicles worldwide to fix flaws in the valve springs, a crucial engine component, that could make the automobile stall while in motion. That includes 138,000 vehicles in the U.S., 91,903 in Japan, 15,000 in Europe, 10,000 in the Middle East, 6,000 in China, 4,000 in Canada, and 8,000 in other regions.

“We apologize for inconveniencing our customers. We hope to fix the problem soon,” Toyota spokesman Paul Nolasco said in a statement.

No accidents or injuries have been reported because of the defect. About 220 complaints have been reported. Toyota said it is replacing the valve spring in the recalled vehicles, produced between July 2005 and August 2008 — Lexus models GS350, GS450h, GS460, IS350, LS460, LS600h, LS600hL and Crown models. Vehicles from the 2009 and 2010 model years are not affected.

The quality problem affecting top-of-the-line products comes as Toyota struggles to move on from massive global recalls that started in October. It already has recalled more than 8.5 million vehicles for various problems, including sticking gas pedals, braking software glitches and defective floor mats.

The world’s top automaker was fined a record $16.4 million in the United States for responding too slowly when the recall crisis erupted.

The latest woes come on top of a recall last week for 17,000 Lexus hybrids after testing showed fuel can spill during a rear-end crash. Analysts say the latest recalls do little to instill consumer confidence after Toyota President Akio Toyoda, facing shareholders last month, vowed to improve vehicle quality inspections.

“It is not doing a good job in communicating a message about what exactly it is doing to beef up quality checks,” said Shotaro Noguchi, auto analyst with Nomura Securities Co. in Tokyo. “So it is hard for people to believe Toyota is taking the customer’s view as it is promising to do.”

Toyota faces more than 200 lawsuits in the U.S. tied to accidents involving defective automobiles, the lower resale value of Toyota vehicles, and a drop in its stock value. The company’s overall sales have been hurting this year following its safety-related recalls. Toyota has been trying to boost U.S. sales with deep promotions, including zero-percent financing and free maintenance.

The Tokyo market reacted with calm to Toyota’s recall news. Toyota shares gained 0.5 percent to finish at 3,035 yen.

Copyright © 2010 The Associated Press. All rights reserved.

General Motors U.S. sales rose by 11%, missing the 16% estimate average that Bloomberg reported. Ford sales rose by 13%, less than the 16% projection reported by Bloomberg.

Many believe that the reports show that the auto market may be slowing down as consumer confidence falters. During the month of June, there was an annualized rate of 11.1 million vehicle sales, down from 11.6 million in May, according to data from AutoData Corp. The rate improved from 2009’s level of 9.7 million annualized sales. Between 2000 and 2007, deliveries averaged 16.8 million annually.

“Car sales are in line with the consumer confidence numbers that came out, which were a huge disappointment,” said John Wolkonowicz, an analyst with IHS Automotive, a research firm in Lexington, Massachusetts to Business Week. “Traditionally, June is a good selling month. But there are other overriding circumstances this June that are causing some disappointment.”

General Motors saw a 53% gain in Buick sales, a 32% increase in Chevrolet sales, a 39% increase in Cadillac sales and a 45% increase in GMC sales. Sales of the Camaro fell 19%.

Jumpstart Automotive Group, a leading automotive marketing and publishing network, today announced that Ford has officially separated from the rest of the automakers, trumping primary competitors like Chevrolet, Toyota and Honda across Jumpstart’s portfolio of 11 automotive shopping websites.

In May 2010, Ford’s share of shopping across the Jumpstart Automotive Group properties, including Vehix, Consumer Guide Automotive, JD Power Autos, Shopping.com Autos, Car and Driver and Road & Track, was 10 percent greater than Chevrolet. Ford now maintains its spot as the number one most shopped and researched brand across the Jumpstart channel, which boasts an average of 13 million monthly automotive shoppers and enthusiasts. According to Jumpstart, Ford earned its number one position roughly midway through 2009, but finished the year only one percent greater than Chevy. In May of this year, it stretched its lead to 10 percent.

“Ford’s 2010 surge reflects continuous improvement of the automaker’s brand perception and awareness,” said Joe Kyriakoza, Vice President of Marketing Communications at Jumpstart. “Ford vehicle redesigns and refreshes, as well as the development of industry-leading technologies like Sync, have helped the company resonate exceptionally well among consumers.”

It appears the shopping patterns observed by Jumpstart are translating into sales activity, with Ford enjoying a 30 percent growth in sales from January through May 2010, compared to that same timeframe last year. Vehicles like Ford Focus, Ford Taurus and Ford Fusion are challenging the historic segment leaders, while Ford’s F-Series continues its domination among competitive brands with a 35 percent sales growth from January to May of this year.

Kyriakoza says Ford’s successful run has occurred despite the fact that the red-hot Fiesta has yet to arrive in U.S. dealerships. The interest and buzz associated with Fiesta has been staggering, thanks to Ford’s plan to begin generating awareness of the vehicle 18 months prior to its availability to consumers via the Fiesta Movement.

On Jumpstart’s properties, Fiesta has seen activity soar by 71 percent in last month versus its overall 2010 average, significantly ahead of segment leaders like Honda Fit, Chevy Cobalt and Toyota Yaris. Fiesta’s audience gains have also effortlessly surpassed other buzz-worthy upcoming launches like Nissan Leaf and Chevy Volt.

According to Kyriakoza, Jumpstart’s diverse and distinct third-party shopping properties offer the company’s Strategic Insights Team the ability to measure the usage patterns and shopping trends of over 13 million in-market shoppers and influencers per month, demonstrating a relevant proxy to true market conditions.

“Not only can we monitor the online behaviors of millions of automotive shoppers and enthusiasts, we can tie those behaviors into what’s happening at the retail sales level. At this trajectory, it will be interesting to see how Ford rounds out 2010 and how it positions itself for continued growth into 2011.”

About Jumpstart Automotive Group
Jumpstart Automotive Group, part of Hachette Filipacchi Media U.S., is an expert automotive marketing company. It represents the broadest and most diverse audience of in-market car shoppers across 11 automotive websites that include Vehix, Consumer Guide Automotive, JD Power Autos, Shopping.com Autos, Car and Driver, Road & Track, CarSoup.com, U.S.News.com, HybridCars, CarGurus, and TrueCar. Fueled by a passion for performance, the Jumpstart Automotive Group is committed to the development of quality content and services for consumers and to maximizing publisher revenue and advertiser results through innovative products and services. Additionally, Jumpstart has been on the forefront of behavioral targeting and is now developing leading research and strategic insight products.

The question became timely when news leaked on Friday, stating that General Motors had chosen Morgan Stanley (MS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) as the prospective underwriters for the deal, which could top $10 billion and mark the first major IPO to hit the market since Visa went public in March 2008.

Although GM’s major shareholder, the United States Treasury, could always deny the selections, there is no indication it will do anything other than squeeze the underwriters to vastly reduce their fees for handling the sale. These fees could be the “lowest ever,” notes William Smith, whose Smith Asset Management previously owned GM shares but who no longer follows the company.

Given that these banks were also windfall beneficiaries of government largess, cut-rate fees would seem appropriate. But Treasury better hope it still gets full-fare treatment from the investment banks, because selling investors on GM — still known to many as “Government Motors” — could be as hard as pitching a new GM car to once loyal customers.

Investors will recall the shellacking so recently received by owners of the old GM, with stockholders virtually wiped out and many bondholders in GM’s bankruptcy forced to accept tiny or inequitable recoveries. That’s not to say that investors can’t get over previous hurt feelings or develop some patriotic flourish, if the price is right. But a good deal for the US government — and in extension the US taxpayer — may not be so appealing to potential investors putting new skin in the game.

Is GM worth more than Ford?

As with any insider, the US government, which holds a stake in GM worth more than $42 billion, obviously would like to maximize its profit, or at least minimize its loss. By extrapolating from current pricing on existing GM bonds, Eric Selle, a debt analyst at JPMorgan, has calculated that investors might support a GM market capitalization of somewhere between $70 billion and $90 billion, potentially providing the US government with a tidy profit.

Such a valuation would be a significant premium to its more profitable rival Ford, which is worth about $40 billion today. But analysts say GM can justify a higher multiple to cash flow due to the company’s much lighter debt load and its recent operational improvements.

GM has made major strides since entering bankruptcy in June 2009. Last month the car company beat analysts’ estimates when it announced that it had earned $865 million in the first quarter. The numbers were helped by GM’s ability to get incentive-happy auto buyers and by an increase in global sales, including important emerging markets like China. This is an improvement from the same quarter last year when GM lost $6 billion. Over the last five years, GM has lost about $80 billion.

In many ways, GM rode a tide that lifted all boats, and one that could continue to aid the entire automotive sector. Efraim Levy, an auto analyst at Standard & Poor’s Equity Group, believes the industry bottomed in the second quarter of 2009 and he projects strong overall growth in car sales in China, India, most of Asia and in parts of Latin America. “We are in a bull market for automotive demand,” says Levy. “The world is wealthier, there is more demand for vehicles and this will help automakers.”

But GM also benefitted from its near-death experience in 2009. Following a $6.7 billion U.S. government loan, union concessions and a contentious bankruptcy, GM cut more than $45 billion from its debt noose, brought its multitude of brands down to a manageable four in size and began trimming its sprawling dealer network. It improved its car design and worked to optimize its manufacturing.

“What previous management did and what was accomplished in bankruptcy is one of the most dramatic transformations of any company in American industrial history,” notes William J. Holstein, the author of Why G.M. Matters: Inside the Race to Transform an American Icon.

Perception is reality

That doesn’t mean GM is out of the woods. While GM may be “on the comeback trail,” Holstein also says that the dealer network remains underinvested and too sprawling, and that the company’s marketing “has yet to prove that it can fire a thirst for GM’s undeniably improved vehicles.”

GM has long struggled with the perception that its cars were clunkers. Although the first quarter’s warranty payments dropped to about $821 million, or 10% compared with a year ago, consumers have been reluctant to believe quality has improved.

The most recent biannual “perceived quality survey” by Automotive Lease Guide (ALG), an automotive consultancy, showed some GM brands like Chevrolet with scores over 50, and the standout Buick topping 57. But that still doesn’t come close to competitors like Honda (HMC), Nissan (NSANF), or Ford’s (F, Fortune 500) trucks, which reached scores greater than 70. Even Toyota (TOYOF), which is in the midst of a brutal publicity-battering recall, still beats GM’s brands with a ranking of 67.6.

Also, GM’s recent profit may not be as rosy as it seems. The company benefitted from a bankruptcy gift of $863 million, the amount of interest expense it no longer had to pay on its old debt. And its stellar U.S. sales figures — 212,800 units in May — was largely driven by fleet customers, such as car rental agencies and government buyers, who accounted for 38% of the purchases, according to Edmunds.com. The number of retail consumers actually fell in May, and those that bought were still being enticed by pretty hefty profit-squeezing incentives, including 0% financing. Going forward, Morningstar automotive equity analyst David Whiston, who is generally positive about GM’s cost structure and its product line, such as the new Chevy Cruze, adds that GM will still face headwinds in Europe; Germany has so far rejected GM’s plea for economic aid at its struggling Opel unit, for instance. Also, GM’s prosperity could be nicked by tough UAW negotiations scheduled next fall.

The entire sector would be squeezed if commodity prices keep moving higher, if credit doesn’t continue to loosen, if unemployment refuses to fall or if economic growth projections prove too optimistic.

The new GM may have a brighter future than the legacy GM left on the bankruptcy heap. But for those looking to buy in, value could be increased if political expediency made the US government a more motivated seller, if GM was knocked from what Whiston calls its current “sweet spot,” or if GM’s boosters turned more tepid.

Also, with recent IPOs performing somewhat poorly, investors could be rewarded by some guarded patience. As Holstein notes, GM “could be very attractive in five years. Everything just depends on where it is priced.”

“Over the last year, Ed has crisscrossed the country in a tireless effort to cut through red tape and speed the economic recovery for those hit hardest by the auto industry’s struggles,” according to a White House statement issued on Monday. “The results of his efforts have been felt in auto towns across America — from the factories being put back to use years ahead of schedule to the workers retraining for jobs in emerging industries.”

President Obama said the administration is looking for a replacement for Montgomery. Montgomery was the executive director of the White House Council on Automotive Communities and Workers.

The White House set up the council on June 23, 2009. It was established to cope with a decline in employment in the auto industry — which the administration pegged at 400,000 jobs lost at the time — “with resulting increases in poverty and high home foreclosure rates,” according to the executive order that set up the council.

The council helped communities deal with the government-led bankruptcies of GM and Chrysler.

Inside Line says: The auto recovery is still sputtering along, so it will be intriguing to watch who steps into this critical post.