As Ally Financial continues its recovery from the financial crisis, longtime Charlotte banker Jeffrey Brown has been tapped for a key role.
Since a promotion in March, Brown, 41, has been heading Ally’s auto finance and insurance business. It’s the first time the head of Ally’s largest segment is based in Charlotte.
Brown, previously the company’s head of finance and corporate planning, will remain based in Charlotte, even though the business he oversees is headquartered in Detroit.
The segment, dealer financial services, made a pretax profit of $413 million in the first quarter, eclipsing the profit of $17 million in its next most profitable segment, mortgage.
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Ally is formerly the financing arm of General Motors Corp., which accepted $17.2 billion in a financial crisis bailout. It’s the only auto-related company still in the program. U.S. taxpayers still own about 16 percent of the company’s common shares.
The company’s CEO has said it should be able to exit the bailout by the end of this year. Ally, which went public in April, reports that the Treasury has received a return of about $700 million from its bailout investment in the company.
As it tries to move past crisis-era challenges, Ally has been narrowing its focus in recent years. The company has been cutting expenses, and last year it sold its international operations and exited its mortgage-origination business.
Brown is trying to grow the company’s auto-lending business at a time of intensifying competition in the industry. He is also tasked with helping Ally continue to diversify the manufacturers and dealers with which it does business after Ally’s loss of preferred-lender arrangements with GM and Chrysler within the past year or so.
Such efforts come at a time of increased regulatory scrutiny of the auto-lending industry. Last year, Ally, one of the largest indirect auto lenders in the U.S., agreed to pay $98 million to settle claims that it discriminated against minority borrowers.
Before joining Ally, Brown was treasurer for Bank of America for a year. He served in that role as it bought Merrill Lynch, whose mounting undisclosed losses before the bank’s purchase have been the subject of Bank of America settlements.
Brown, who left in February 2009 to join Ally, had told Bank of America's then chief financial officer that the Merrill losses should have been disclosed before a shareholder vote on the purchase, according to court documents.
Ally employs roughly 800 people in the Charlotte area, where it has had a presence since 2009.
His comments have been edited for brevity and clarity.
Q. Charlotte is one of Ally’s three “corporate centers,” in addition to Detroit and New York. What goes on here?
A. In a lot of respects, Charlotte is one of the engine rooms that we have in the company. A strong presence of risk is based here, strong finance presence, corporate treasury. You have compliance based here. While the bank is domiciled in Utah ... a lot of our banking operations are sort of developed in Charlotte. We have (a) brand and digital group (in Charlotte), so a lot of the creative forces that are designing the new Web programs. (Also), technology also has a strong presence here. Within Charlotte, I would say (Ally doesn’t) have a large amount of dedicated focus on the auto business.
Q. Ally is planning to close its Ballantyne operation this year. Why?
A. We have had three facilities (in Charlotte): We have the Ally Center uptown, we've had a facility out in the SouthPark area, and we've had a facility in the Ballantyne area. We will consolidate down by the end of this year to primarily being focused in uptown Charlotte, as well as in SouthPark.
Ballantyne has had a number of our IT, our technology, partners, some compliance folks. And a lot of those people will end up rolling into the uptown (Ally Center) building. We like our corporate centers and the people to be together … where you can have better collaboration.
Q. Any layoffs expected with the consolidation?
A. It was not designed to reduce headcount. I'd say, for the most part, we feel pretty comfortable with that 800-person headcount that we've got in place today. I'd say there's no real initiatives to try to grow headcount here.
Q. Ally has no branches and operates online only. It’s in a place where the banking industry, which has been closing branches, seems to be heading.
A. If you look at a number of big banks that are out there trying to dispose of bank branches, we think our model really aligns for how consumers want to bank. It (also) allows us to invest the dollars into better technology. Not carrying around the weight of a brick-and-mortar network is a big competitive advantage.
Q. How’s the auto-lending business going?
A. Going very well. We had a very strong first quarter, $9.2 billion of ordinations in total. That was up $1 billion from our originations in the fourth quarter. Relative to any other asset class today, auto's probably the most competitive asset that banks are after. Why is that? (Partially because) we're in a very low-interest-rate environment (and) banks are concerned about getting hung up with long-duration assets when rates start to rise. You don't have that risk in the case of auto. Consumers take out a loan – on average it’s a five-year loan, a six-year loan – and they typically decide to trade the car after 2 1/2 or three years.
Q. Are auto lenders being too risky as they seek to compete with one another?
A. You see a lot of our competitors making what I would say (are) non-economic decisions at this time, extremely low rates being offered for loans to both consumers and dealers that simply are not long-term sustainable.
Q. Does Ally feel it’s moving past its crisis-era challenges?
A. To use a phrase my boss has been saying, we’re finally out of a position where we have to be on the run and playing defense all the time. If you think about the past 5 1/2 years that I’ve been here, it’s been largely with ... the company’s back up against the wall ... people questioning the viability of Ally in general. We’re finally at a chapter of this company where we can start looking at being growth-oriented, having a growth mindset, continuing to grow our dealer relationships, to expand our dealer relationships.
Q. The settlement announced last year by the Department of Justice and the Consumer Financial Protection Bureau resolved claims that Ally charged minorities higher interest rates on auto loans than whites. What has Ally done since then to ensure that doesn’t happen again?
A. As a company, Ally does not practice any discriminatory practices, does not believe in discrimination and ultimately supports the CFPB's ultimate mission, which is to ensure that there's no discrimination occurring to consumers. As a result of our agreement with the CFPB, and our work in general, Ally's continuing to enhance its monitoring efforts of our dealers to ensure that we don't see any discriminatory practices occurring within contracts that we see.
Q. What’s your dream car?
A. A Porsche 911 Turbo S.