After a year and a half of fighting, Al de Molina's bid to save General Motors hinged on a Christmas Miracle...
2008 was ending, and de Molina was trapped in a three-way standoff between the lending operation GMAC, the company's bondholders, and the Federal Reserve.
If de Molina lost this fight, GMAC would fold and take down the carmaker and thousands of local dealerships with it.
De Molina's journey began in August 2007, when he became the chief operating officer of GMAC. At the time, subprime lending markets were already cracking. The worst of the global financial crisis was still a year away. But many consumer-focused companies were already feeling real pain.
And few felt it more than the auto industry... and GM especially.
Like many car companies, GM had long operated two businesses...
One division (GM) built and sold cars. The other half (GMAC) financed these vehicles.
When someone bought a car from GM, GMAC would purchase the car from GM. It would then give the car to the consumer, who would pay GMAC over time through an auto loan.
GM received the cash up front. GMAC took on the credit risk, and the consumer drove off happy.
Although GMAC had spun off from GM in 2006, the companies' fortunes were bound together. GM still owned 49% of the lending company and relied on loans going through GMAC.
You see, GMAC also loaned capital to individual dealerships so they could stock their lots with GM cars.
With so many loans being written all the time, GMAC didn't have enough cash to lend to people. So it borrowed money from the bond market that it would turn around and lend out to dealerships and consumers.
The formula worked great when the economy was working.
In 2007, though, it was a recipe for ruin...
GM's sales would fall 17% in 2008... and 29% in 2009. As people stopped buying cars, GMAC wrote fewer loans. That meant it collected less interest income.
It also meant less money for dealerships, which now struggled to pay back the loans they used to stock their lots.
Consumers stopped buying... dealerships couldn't pay their debts... and frozen credit markets meant GMAC couldn't refinance its debt. The ripple effect threatened the end of a 100-year-old auto giant.
Enter Al de Molina...
De Molina wasn't an auto-industry vet. But he knew finances. Prior to joining GMAC, de Molina spent 17 years at Bank of America, where he spent a year as CFO in 2006.
He expected to parachute in, clean up GMAC's operations, and move on.
But what was supposed to be a quick fix turned into anything but...
GMAC lost more than $2.3 billion in 2007... and was on track to lose $7.2 billion in 2008.
By the time de Molina took over as GMAC's CEO in March 2008, he realized the only way to save GMAC – and the thousands of dealers that relied on it – would be to turn the lender into a bank.
Becoming a bank would allow GMAC to raise deposits and make it eligible for the government's emergency bailout funds.
It was a huge undertaking... And de Molina had nine months to make it happen.
GMAC was in a race against time. If the company didn't secure cash by the year's end, it would break loan covenants, potentially pushing it toward bankruptcy.
With GMAC out of commission, GM and its dealers would fail. More than 85% of North American GM dealers would lose access to vital funding.
De Molina's first challenge was to convince GMAC's two shareholders to reduce their stake in the company...
Investment firm Cerberus Capital Management had to drop its 51% share to 33%. GM had to cut its stake from 49% to less than 10%.
This was the easy part.
The bigger challenge – GMAC needed a big injection of equity from somewhere.
The Federal Reserve required banks to have specific amounts of cash or equity based on their outstanding debts. GMAC had too much debt and not enough equity or assets.
By the fall of 2008, Lehman Brothers had collapsed, and private markets were closed... especially to companies facing bankruptcy. So a cash injection was off the table.
It had one path to survival. The Fed told GMAC it needed to convert 75% of its $38 billion in bonds into equity. That was its only chance to qualify as a bank and save its business.
But GMAC bondholders didn't want to convert their bonds into shares of a failing company. GMAC argued that without the conversion, bondholders could lose everything.
In the end, the Fed blinked.
On Christmas Eve, the central bank approved GMAC's transformation into a bank... even without action from bondholders...
GMAC later said that it had converted only $21.2 billion worth of bonds into equity, about 52%.
But that was enough. The newly minted bank ultimately received more than $17 billion in bailout funds by the end of 2009.
GM eventually went bankrupt. But de Molina's ability to keep GMAC afloat meant thousands of GM dealerships could stay open as the carmaker worked its way out of bankruptcy.
Today, GM is once again one of the largest auto companies in the U.S. And GMAC is still around too, only it goes by the name Ally Financial (ALLY).
Ally remained a full-fledged bank – with one catch...
From its start, Ally had the institutional know-how and a solid foundation of borrowers. But it didn't have a network of physical branches like traditional banks.
Rather than trying to play catch-up with legacy banks, Ally embraced its position...
It became one of the first fully digital, branchless banks.
Companies like Ally have changed the rules of banking. No longer do banks need fancy lobbies and smiling tellers to attract new customers.
Instead, they rely on user-friendly, comprehensive banking apps that can handle all of a customer's money-related needs.
Today, a solid banking app isn't a "nice to have." It's a necessity. It doesn't matter if you're a tiny regional player... or a financial giant. Tech is non-optional in today's banking industry.
And the businesses that embrace it should outperform the rest.
Let's jump in.
Regards,
Joel Litman
December 12, 2025
