Higher rates, inflation push restructure with jobs to go
Ally Financial Inc. has announced plans to discontinue mortgage originations and to explore alternatives for its credit-card business amid rising consumer credit challenges.
The company will also reduce its workforce as part of its ongoing effort to right-size operations, affecting less than 5% of Ally's approximately 11,100 employees across multiple business lines and locations.
The company expects to complete the wind-down of mortgage originations this quarter.
"As we continue to right-size our company, we made the difficult decision to selectively reduce our workforce in some areas, while continuing to hire in our other areas of our business," said Peter Gilchrist, Ally spokesperson, as quoted by Bloomberg.
Gilchrist also added that the company remains confident in its long-term strategy and its ability to deliver compelling returns given the strong underlying trends in core businesses.
The decision comes amid intensifying credit challenges across Ally's divisions, including its auto-lending business.
Chief financial officer Russ Hutchinson highlighted how higher interest rates and inflation-driven increases in living costs have impacted consumer debt management.
In November, Ally also noted challenges reported by consumers who purchased second-hand autos back when prices were high in 2022, underestimating the full impact of inflation despite being employed. Borrowers complained of stiff loan payments on top of car ownership costs.
In response to these market conditions, Ally has already implemented stricter auto loan qualification criteria and is considering increases to loan loss reserves.
The company will maintain its focus on expense management while pursuing strategic opportunities.
"We'll continue to be diligent in our expense management going forward," Gilchrist concluded.
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