Ally Faces Credit Crunch, GM Employees On The EV Train, The EV Slowdown Myth

Daniel Govaer: 0:00

Good morning and welcome to the asotu troublemakers today, on September 11, we take a moment to remember the 2977 lies lost 23 years ago. Today, I'm wearing this hat in honor of the courage of the 343 New York FD, firefighters who made that ultimate sacrifice, along with their brothers and sisters and other first responders. This is a powerful reminder of the courage and selflessness that defined us that day. We will never forget the pain and devastation of that tragic moment. It is important to remember that it didn't stop us as a nation and as individuals. We moved forward, sometimes slowly, but always forward, that they tested us, but it also showed our resilience and our refusal to be stopped. And here we carry that same spirit. We come together from different places, different roles, all moving toward all moving forward with a common purpose. We grow, we innovate, we face challenges head on, but we continue in our industry and in our lives. Let's honor those we lost by pushing forward always stronger together. And please join me in A moment of silence. You

‍Kyle Mountsier: 1:20

music, good morning. Thanks for pausing with us for that moment. Never too far from that to have a moment. DG, welcome to the show. Thanks for bringing us in. We're talking about ally GM and the EV, slow down myth. Everywhere

Unknown: 1:35

I go, the people really want to know who I is and who I do. Stop this deal when they see me if, instead of wants no need to repeat, run up on me. Watch you fall to your

Kyle Mountsier: 1:44

knees. DG, you you've got, you're like a wordsmith. You know what I mean. I just appreciate your ability to communicate clearly and when you have to, when you write it and read it, it's almost as good as when you ad lib.

Daniel Govaer: 2:00

No, nothing's better than the ad, I know, but that needed a bit of that had to sit down and put that one day I thought it was just, you know, it really, I mean, it's, and it's, like, I said, it's us, we continued moving forward, yeah? And so I appreciate the opportunity,

Kyle Mountsier: 2:15

yeah. No, I, you know, I think that, like we, I was so I was thankful that our writing team also took a moment to just like at the beginning of the email today. Just recognize that. And you know you can, you can get removed from moments in history and and slowly start to like, be disengaged with that moment. And whether it be the pandemic or 911 or World War, you kind of become disenfranchised from the idea that it impacts you or impacts the daily life of those around you. But, you know, pausing to remember those, those things I think, is important for us, for sure.

Daniel Govaer: 2:55

Yeah, and if anybody's, anybody's at a dealership and you guys, maybe, you know, get some lunch for your local you know, firefighters or paramedics or police, it might just be a nice thing to do today, just to let them know. You know, we don't forget and we appreciate first responders. That's

Kyle Mountsier: 3:08

a great I mean, look, we could end the pod right there. Hey, go buy your buy, buy some lunch for some local first responders. A great grab. Hey, tomorrow, we have an asotu Edge webinar. What's holding your title department back that you are going to want to check out if you go to asotu com, scroll down just a wee bit. You can register for that webinar, and would love to have you there. You know, title department is often forgotten, but never forgotten, by customers who can't get their titles, can't get their work done. Can't get the registrations, holding your titles back. What? What is holding your title department back?

Unknown: 3:46

What is it with the titles? What? Why? Why is

Kyle Mountsier: 3:49

it like every dealership that I've ever worked for worked with everything, it is a tough thing to deal with. Everybody's like getting second temp tags the whole nine yards. It's brutal. You know? You know, I do.

Daniel Govaer: 4:01

I mean, listen, fix car washes and fixed titles. And it's like, you've got two of the biggest pain points right there? Yeah, it's

Kyle Mountsier: 4:06

like, car washes and titles are like our McDonald's ice cream machine. You know what? I mean, I had to go there that. I'm sorry that's

Daniel Govaer: 4:14

not it, right? I don't know what.

Kyle Mountsier: 4:19

All right, let's get into it. A first story today is Ally. Financial is grappling with growing credit challenges as high inflation impacts borrowers, resulting in increased delinquencies. Their shares plummeted 17.62% on September 10, 10th, signaling the pressure the lender faces. The delinquencies in their auto sector increased by 20 basis points in July and August, compared to allies expectations and net charge offs, meaning unrecoverable debts, increased by 10 basis points during the same period, borrows have obviously been cutting back a lot. Ally has actually sold its lending business to Synchrony Financial to address its credit. Issue their CFO Russell Hutchinson specifically mentioned that the number of borrowers in the 61 plus day delinquency category has become a point of concern with more underperformance expected in this bucket. His quote a bar our borrower is struggling with high inflation and now, more recently, a weakening employment picture. So it's not just that initial lending, but what's happening to lenders and borrowers after the point of acquisition of a loan, right? And

Daniel Govaer: 5:29

I think also it's, you know, there's all so much data out there, and it's like reading the tea lease, right? So there's, they're talking about their about their borrower, and where allied might be, you know, where their credit portfolio might be lying is with credit scores that you know might be in those mid sixes and that might track along with the nation's statistics, but when you see that there's auto delinquencies that have ticked up a bit and people that are in this 60 day or 90 day plus mark like that's not across the credit spectrum. So is, it is a little flashing light, and it is, it is there certainly. And I'm not suggesting that this problem only belongs to ally, but if it's made that much of an impact for ally, then it's kind of a telling story about where you know, where they've been investing in their credit portfolio. And I don't think we're telling anything new to anybody that you know that deals heavily in that credit band and or anyone who deals specifically you know and relies on allies or captive finance. I think they've probably been seeing that because the cost of living, the cost of insuring and the cost of everything else have been on the rise now for almost two years. I do, I do think that that that band of credit is really where you start to see the first crunch start. You know, to crunch, to use economic terms, but, and I'm not saying that there's not other warning signs across the industry, but I do think in this case, I want to say it's isolated. I just think it's a bit more

Kyle Mountsier: 6:44

specific. Yeah, and for those just wondering, like that, band, you know, Ally, is a little more, a bit more of a full spectrum lender, not deep subprime, but a bit into subprime, mid prime and near prime. So you you aren't dealing with that 740 plus as much, right? They do that in some captive lending, but much more across the board, has a little like mid prime, near prime. And so you, you, you get that crunch because of, like you said, income levels, disposable income, typically slightly higher, DTI ratios on on some of that lending. So we'll see what, we'll see what continues to happen with this, because, and I think we're actually gonna be talking on the wheelhouse this afternoon, on the recording about, like, what the initial lending scenario is, because it's completely different to when you when you look at, you know, just what's available prices of cars, you know, LTV values going out, just to be able to cover some of the negative equity that we're experiencing from the past few years,

Daniel Govaer: 7:42

right? And people are coming to the table with, you know, now we're seeing an industry wide average of negative equity that's coming into deals, and I think that's also one of the reasons, if you ask most desk managers why they're having problems, you know, getting a lot of deals done is just covering the negative but, yeah, we're gonna, we're gonna dump out as many tea leaves as we can and try to make some type of order out of it, because you certainly have to take into account average, not only your average interest rates, which really haven't gone down, especially on used cars, and then just what, what it looks like from the amount of credit applications that

Kyle Mountsier: 8:14

we're submitting? Yep, absolutely. I got no segue for the second story, but General Motors is intensifying its push toward an all electric future, making it clear that salaried employees must align with its EV vision or move on. A series of organizational changes this year underscores GM dedication to selling only electric vehicles. Still, by the year 2035 they've downsized its global hit their whole their global headquarters to streamline operations, as we covered earlier this year, they revised how it evaluates employee performance with a stronger production and innovation focus. New bonus metrics even more closely aligned with the company's EV goals, even remote work privileges have been reduced for some employees to promote more productivity and collaboration. GM, spokesman person, Kevin Kelly, emphasized, we're committed to making sure our teams have the right skills are working effectively and rewarded appropriately for delivering world class vehicles to our customers. So it's not just an external push, it's an internal push toward making sure that everyone is aligned toward this EV vision and future. Interesting move.

Daniel Govaer: 9:22

Yeah, how much of this is about production and how much of this is about could, Could everyone please stop giving quotes to the press about how they don't think this is a good idea and it's not sustainable? I don't know if this was more of a production line thing or more of a line of, you know, let's, let's align ourselves in our communication. And by the way, like your guys, you know your your GM employee plan now only works on EVs, right? That would be, that would be a pretty drastic move, and we'd see how they would react there. I think that. I think it's not well.

Kyle Mountsier: 9:52

I think we've actually seen that there's a, there's a better incentive on EVs already for GM. I think Nissan moved to that as well. You know, you're seeing, yeah, Ford moved to that. You're seeing these, these manufacturers really, like, try and take an internal push, which, I guess, like, you know, just from working in dealerships, like, you're always trying to get people aligned with the vision on what you're selling, what you're interested in. You're trying to get, you know, people in the vehicle, the manufacturer, right, whatever dealership you're at, you're like, how can I get all my employees driving the driving the vehicle? So it makes a lot of sense. It's just, you know, the question on on our minds is, always, is this logical and practical, or is a little bit too, too much too early,

Daniel Govaer: 10:36

right? Because How much more do we know about exactly what 2035 is going to look like from GMs perspective, or anybody else's right? So, like, that's still the date that's just out there, but everyone

Kyle Mountsier: 10:45

thought that 2024, was going to look, look a lot different than than it was. And everyone's kind of backpedaled on their their claims and their their predictions for this year and their product productivity levels over the next three so how can you predict 10 and start to kind of move an internal narrative and focus on something like that that's so unpredictable. And

Daniel Govaer: 11:04

you notice that it all stops just short of saying we are an EV brand, right, right? Like, be aligned with our strategy, because those

Kyle Mountsier: 11:11

because those margins come baby, those margins come

Daniel Govaer: 11:15

right, and a little bit it's a little marched on Lynch here, right? Like we're here just so we don't get fined. I These EVs are here, so we don't get fined.

Kyle Mountsier: 11:26

Speaking of EVs, so we don't get fined. I guess segway, that was a segue. This is a fun article. We're gonna point this out that it's a very opinionated electric article, which you've ever if you've ever read up on electric a lot of opinions in there, but despite misleading headlines claiming otherwise, this writer says the EVS sales continue to rise globally, though the growth percentages have naturally slowed as the market expands. Typically, media is reporting, obviously over this first year, a slump in EVs, despite declines from automakers like GM, VW and Tesla overall, EV sales in the US in q1 so that's like the full data, that we have still increased by 7% reflecting continued growth in the market. And here's, here's a here's a fun quote from the electric article. Then I want to pull up a couple graphics. But this, uh, this, this. Journalist said, each journalist who has spent the last year perpetuating the myth of an EV sales slowdown should have read any one of our articles or Googled a single number showing year over year EV sales in any region or for most countries and most brands, and found that they are still going up. The information is out there and easy to find. So stop lying. I feel like someone like, I don't know has stock in Tesla or something. We'll see what that is. I do want to point out this one chart, or two charts, our

Daniel Govaer: 12:47

objective look at our objective journalism here from a site called Electric, and that's the only place you should be getting information

Kyle Mountsier: 12:55

from. Yeah. So there's two charts that were there. One is this chart showing just the difference in q1 growth or decline from different manufacturers. And you see, you know, some of the legacy manufacturers starting to dip in and get their toes wet. GM, obviously, with their exclusion of the bolt this year, saw a decline, and then Tesla, as everybody knows, saw q1 decline, but they're on the rebound in q2 so almost a balance in the market at a 7% increase. But then the one that we've been talking a lot about, and if you look at the difference between how plug in hybrids, pure EVs and and, and hybrids, right, gas powered hybrids, and you see this like initial leading indicator, and then in the in the EV world for the past like five years, but hybrids quickly, over the last three quarters, starting to take a significant advantage, primarily due to a company called Toyota, but also other companies heavily, more heavily investing in hybrids. So still a growth in the market outside of non hybrid or electric vehicles. But hybrids definitely still win. Yeah,

Daniel Govaer: 14:10

they're, they're less exp, you know, how many times we're gonna have to say this, right? And Toyota will be the first one to let everybody know that also, right? I mean, they're able to produce hybrids that are, you know, less than$2,000 less expensive than their ice counterpart, you know, if it had to be purely than if it had to go to be purely electric, right? So $2,000 less than making an ice completely electric, and you can still have a hybrid. So like that's been proven to just be a winning strategy. Then also, if you look at the chart with manufacturers the other OEMs. And again, I've always been one 100% on board with the idea that Tesla has a core Tesla market share that is part of the electric and alternate energy vehicle market share, but that Tesla market share is uniquely theirs. There's every other OEM also in the electric space and what their market share looks like. And right? So I would this chart would be fair if we also through. On their average incentive spend, an average average discount and average transaction price like this chart would make a lot more sense to everybody sitting in dealerships. If we looked at how much dealers are being pressured to discount these vehicles, what the average OEM incentive spend is on these vehicles and some of these manufacturers on the chart, you're talking about average discounts nearing 20% on a new car. So are they transacting? Yeah, but maybe, again, maybe we have a broader definition of what selling actually is. And also, let's not forget that manufacturers put a lot of pressure. Manufacturers that have both fully electric as well as ice vehicles put a lot of pressure on the dealerships to make sure that they are moving the electric vehicles. And oftentimes the most common way to do that is with the threat implied, or otherwise, of holding back some of your ice allocation until you can sell your EVs. So they are inextricably tied in a way that, like the the non EV segment never asked for, but the EV segment relies on the ice segment in order to continue to be able to sell and to transact.

Kyle Mountsier: 15:59

Yeah. So is the EV segment still over inflated due to due to discounts, not even just tax incentives, still yet to be determined, because the market is still reacting primarily to discounts in a lot of places, even though there is a core market share, like you said, that is Tesla or is early adopter EV, hey, look, It's just one person's opinion, and we got opinions too over here, but you got things to go do today, people to serve, people to love. Hey, go buy your first responders a nice lunch, a nice meal. Celebrate them. Thank them for all they do. This is America. Let's go. Thanks,

Unknown: 16:36

guys. Am I?

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