Ally Financial Inc., the former finance arm of General Motors Co. (NYSE: GM) known as GMAC, received more than $17 billion in federal bailout funds in 2008 and is now majority owned by the US Treasury on behalf of the American people. Treasury officials are reported to be pressing Ally’s managment to split the company into two pieces — one the auto-finance unit and the other the company’s online bank — rather than seek an IPO, which many believe would fail.

Ally’s management is resisting the idea, and the government is not pressing too hard, according to Bloomberg News, for fear of being viewed as a “heavy-handed owner.” And Treasury officials aren’t the only ones suggesting a split. Bloomberg cites a letter from investor Elliot Management Corp. also recommending that Ally be split up.

Some have suggested that GM purchase Ally’s auto finance business, but that is unlikely to happen until the bank dumps its Residential Capital mortgage unit and strengthens its capital position.

Since 2009 Ally has financed 6.7 million GM and Chrysler purchases for dealers and about 2.4 million for customers. Ally has repaid $5.4 billion of its debt to US taxpayers.

Paul Ausick

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.