GMAC CEO Alvaro de Molina steps down

AP News
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Posted: Nov 17, 2009 7:15 AM

GMAC Financial Services says Alvaro de Molina has stepped down as CEO, a surprise departure that comes as the troubled auto lender remains in negotiations with the government over its third round of taxpayer aid.

GMAC director Michael A. Carpenter will take over as CEO.

A person familiar with the situation said De Molina was asked to step down by GMAC's board of directors. The person declined to be named because the reasons behind De Molina's exit have not been made public.

Treasury Department officials stressed that they had nothing to do with Molina's departure, calling the decision "100 percent GMAC's." That's in contrast to the Obama administration's ouster earlier this year of GM CEO Rick Wagoner, who was pressured to step down as a condition for taxpayer aid.

In an interview, Carpenter affirmed that no government entity had any say in De Molina's departure.

"To the contrary, the board reached its own conclusions," Carpenter said. "As the board looked forward, it decided that it really wanted some more strategic skills. It wanted more turnaround skills, more operations skills. So that is, in short, the basis I believe for a change."

De Molina's resignation comes as the lender is negotiating with the Treasury Department over additional taxpayer aid. GMAC is instrumental to the operations of automakers General Motors Co. and Chrysler Group LLC, but its finances have been haunted by bad loans it made during the housing boom.

GMAC, which became a bank holding company late last year, has received $12.5 billion in taxpayer money and is 35 percent owned by the federal government. The FDIC also took the rare step earlier this year of allowing the junk-rated company to gain access to its debt-guarantee program, called the Temporary Liquidity Guarantee Program. It agreed to guarantee up to $7.4 billion in GMAC-issued debt in case the company defaulted on payment.

But results of the federal government's "stress tests" earlier this year demanded that GMAC raise an $11.5 billion capital cushion to help it weather further economic decline. Of 10 banks asked to raise additional cash, GMAC was the only one that failed to be able to raise the funds privately.

The Detroit lender has asked the government to postpone any decision on additional taxpayer aid until Carpenter and the company's management assess GMAC's situation and are able to advise Treasury on the amount needed.

Carpenter told The Associated Press that the company would need no more than $5.6 billion in aid. Senate Banking Committee Chairman Chris Dodd has said the company would receive between $2 billion and $5 billion more in aid.

De Molina's exit ends a tenure that lasted less than two years. GMAC declined to make him available for interviews, but he said in a statement it was a "good time for me to move on to my next chapter."

"I came to GMAC thinking that it was a short-term assignment working through a liquidity crisis. That crisis lasted two years," he said. De Molina did not say what his next move would be.

De Molina was named CEO in April 2008 by private-equity firm Cerberus Capital Management LP, which held an ownership stake in the lender at the time. He was recruited the year before as GMAC's chief operating officer after spending 17 years at Bank of America Corp.

Bank of America has been seeking a new CEO since announcing Ken Lewis would step down. A Bank of America spokesman declined to comment on speculation that De Molina could fill the role. Richard Bove, a banking analyst at Rochdale Securities, said de Molina would be a good successor to Lewis, but his appointment is unlikely.

"He took like 150 people out of Bank of America to help him at GMAC. He left a really bad taste in the mouth of the board and managers," Bove said.

Carpenter, 62, has been on GMAC's board since May. He was previously CEO of Citigroup's Global Corporate and Investment bank from 1998 to 2002. He headed investment bank Salomon Smith Barney until it merged with Citigroup and also held leadership positions at Travelers Group Inc. and Kidder Peabody Group Inc.

GMAC said Carpenter has resigned from the board of commercial lender CIT Group, which is operating under bankruptcy protection, to devote his full attention to GMAC.

GMAC provides the financing for dealers and customers of GM and Chrysler and its survival is a crucial part of the Obama administration's restructuring of the auto industry. Carpenter said in an interview that providing auto financing is the company's No. 1 priority. Paying back the federal government ranks No. 2.

The lender has been hammered by the downturn in the mortgage and automotive industries. Earlier this month, it said it lost $767 million during the third quarter, as bad loans in its mortgage division, ResCap, weighed on its books. Its auto lending division, however, posted a profit.

Carpenter acknowledged ResCap's finances have weighed on the company and said GMAC is exploring ways to address the division's woes. He said "everything is on the table" and would not rule out a bankruptcy filing for the unit.

A bright spot for GMAC has been Ally Bank, its online consumer banking unit. The bank has offered some of the highest interest rates on CDs in the industry, helping bring in billions of dollars in new deposits this year. But the rates have also irked rivals and drawn the attention of regulators, since as the rebranded banking unit of GMAC, Ally has the backing of billions of government dollars loaned to GMAC.

Federal regulators have since intervened, after an industry group expressed concerns about Ally's ability to afford to pay such rates for deposits. Company executives have said that Ally's rates remain competitive.

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Associated Press Writers Stephen Manning and Daniel Wagner in Washington and Sara Lepro in New York contributed to this report.