Thread regarding Ally Financial Inc. layoffs

Even if you move to another company the same stuff is going on or even worse

Start unionizing instead. More cuts are coming in Q2/3 not just in headcount but in expenses. They're floating the idea of making you pay for parking at $280 per month and no more personal device reimbursement either. This place will be completely different by September 2025. Unionize! You should not be sacrificed because the CEO is incompetent and cannot grow the business. It is his job to grow the business not just to cut costs to pretend that he's doing a great job. You have value. This CEO has yet to prove to investors and the Board that he has any value. Unionize!

I’m assuming the reason for the layoffs is that the shareholders are not happy as EPS is not meeting expectations. So prior to YE24 earnings they wanted to get ahead of the noise - I bet the YE earnings are going to come in below expectations so on the investor call Rhodes can say we recognize the shortfalls and here is everything we have already done to correct it (including already cutting costs).

The person who posted about the Carvana thing is absolutely correct. It’s not like we just wrote a check for $4B earlier this week.

The Carvana purchase had nothing to do with layoffs. Bulk loan purchases are nothing new and I’m sure Ally did their DD on Carvana’s underwriting process and felt comfortable with the credit risk. Besides, it’s highly like these loans will be pooled, tranched, and securitized as ABS and will be off the balance sheet and become someone else’s problem.

Okay thank you for this, in your opinion what was the reason for the layoffs

The Carvana purchase had nothing to do with layoffs. Bulk loan purchases are nothing new and I’m sure Ally did their DD on Carvana’s underwriting process and felt comfortable with the credit risk. Besides, it’s highly like these loans will be pooled, tranched, and securitized as ABS and will be off the balance sheet and become someone else’s problem.

Hello, thank you for sharing this. I just read the entire report and did some digging myself. I am not in Finance, so my understanding is limited. From what I do understand it seems like we are aiding a company that is actively committing fraud...

Honestly, I’m baffled by the leadership here. I don’t know who signed off on this, but it seems half thought-out at best. Again, from what I understand, Ally was already in talks with Carvana before the new year to give them more financial leverage. Ally wanted a steady stream of financing deals and probably saw this as a way to solidify their position in the auto financing space. Then, on Friday, January 3, 2025, just one day after the report came out they amended the agreement. This allows Carvana to sell up to $4 billion in auto finance receivables to Ally over the next year.
The

Carvana CEO Ernie Garcia III’s father, Ernest Garcia II sold $1.4 billion in Carvana stock before the report hit. It sounds like other insiders are also unloading the stock, the company’s solvency risks remain.

From https://hindenburgresearch.com/carvana/
"Almost 26% of Carvana’s gross profit consisted of sales of customer auto loans to third parties, largely in the risky subprime and deep subprime space. Gain on loan sales represented 2.2x Carvana’s net income in the past 9 months."

This next part is copied this over from www.businesswire.com

• The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors. Carvana is the subject of a report published by Hindenburg Research on January 2, 2025. The report, titled: “Carvana: A Father-Son Accounting Grift For The Ages,” alleges that the Company’s turnaround is a “mirage.” The report claims, “Our research uncovered $800 million in loan sales to a suspected undisclosed related party, along with details on how accounting manipulation and lax underwriting have fueled temporary reported income growth – all while insiders cash out billions in stock.”-

What I’m struggling to understand is whether Ally knew what was happening behind the scenes with Carvana or if it was already too late to pull out of the deal.

Part of the issue is that Carvana operates like a tech company that just happens to sell cars. They’ve been accused of buying vehicles without proper assessments, selling cars without titles, failing to disclose damage, misquoting mileage you name it. With so many complaints, it’s hard to blame someone for refusing to pay their loan when the product wasn’t what they were promised.

Now, the big concern is that if Carvana’s financial health declines or customer defaults pile up, this could bleed into Ally’s books. Leadership will probably say this risk is manageable because of Ally’s diversified portfolio, but let’s put this into perspective: Ally has an $11 billion market cap and just threw $4 billion at Carvana. If this is really “manageable,” why did we lay off employees on their first day back in the office after signing the deal?

In my opinion it looks really bad, we look fishy, I would not be surprised to see us in the news in the coming weeks.

I’d love to hear what others think about this. Specifically, people in risk, and finance.

Sources:
https://hindenburgresearch.com/carvana/
https://finance.yahoo.com/news/play-cvna-stock-now-amid-145200683.html
https://www.autonews.com/retail/used-cars/an-carvana-ally-renew-loan-sale-agreement/
https://www.autofinancenews.net/allposts/risk-management/ally-lowers-carvana-forward-flow-agreement-to-4b/
https://www.businesswire.com/news/home/20250102562314/en/CVNA-Investors-Have-Opportunity-to-Join-Carvana-Co.-Securities-Fraud-Investigation-with-the-Schall-Law-Firm
https://www.nasdaq.com/articles/short-seller-attack-carvana-cvna-opens-compelling-options-strategy

I had no idea about any of this, thanks for sharing. Do you think this is why the cuts were made? If so that is SHADY. Also wonder why nobody at Ally is talking about this.