Newly appointed Ally Financial chief executive officer Jeffrey Brown wasted little time articulating how he will steer the company. Brown hosted his first conference call with the investment community on Thursday, just three days after succeeding Michael Carpenter in the CEO chair.

A primary spot where Brown thinks Ally is underachieving is the amount of non-prime paper the finance company is originating. Brown estimated that about 9 percent of Ally’s fourth-quarter originations fell into the non-prime space. He would like that level to rise to 12 to 15 percent.

“If we see attractive risk-reward opportunities, we’re going to go after it,” Brown said. “I think we actually have to do more of that. When I look at where I think we sort of underachieved holistically is we probably didn’t take on enough credit risk over the last two or three years. We’ve got to slowly figure out how we do that.”

Brown acknowledged that for Ally to boost its non-prime originations to that target, it might come through more used-vehicle retail installment contracts, a segment of the market the new Ally boss says he is “completely comfortable.” Part of the reason for that comfort is Brown said he understands that the used-vehicle financing space is possibly twice as large as the new-model financing area.

“The credits often are a little softer, a little more near-prime, non-prime than what you see in the new or leasing business,” Brown said. “I’d say it doesn’t bother us. We have very sophisticated risk management processes and a deep history, that 100-year history, of really understanding how to price credit and price risk.”

The Ally CEO went on to explain why the used market provides a more fertile field to plant a larger non-prime portfolio.

“Severity of loss is usually much lower because the car has been through the initial up-front hit. When you do have losses, severity is lower, but delinquencies are probably a touch higher,” Brown said. “But I think our job is just to price appropriately for the risk we’re taking, and we’re going to continue to do that. I think the board has established for us some subprime and non-prime targets that we are underachieving against. We’ve got to figure out is that an opportunity we want to pursue with bigger energy and potentially provide some attractive returns for us.”

Those returns might come from Ally deploying more of its credit availability to the non-prime space since that liquidity won’t be taken up by OEM commitments. General Motors plans to send its leasing business primarily to General Motors Financial while Fiat-Chrysler Automobiles now has Chrysler Capital at its disposal to handle captive finance company chores.

“We deliberately positioned the company to continue with our growth initiatives to offset any decline manufacturer subvented areas,” Brown said. “After spending the last year running the auto business, I know that there are great market opportunities out there for us, and we have the team and the tools to capture them. There’s clearly more we can get out of the existing engine.”

And that Ally engine evidently is ready to rev the RPM level even higher in the non-prime sector, a credit segment where Brown believes the finance company already owns a strong position.

“We still are a major player when you step back and look at the overall industry. We’re kind of a top five non-prime player,” Brown said. “But relative to our own capital allocations, strategies and risk appetite, I think we’ve underachieved there. I think the board has given us more authority to go after and look at more non-prime credit.

“Again, you have to ensure you’ve got the right risk-reward dynamics and that your risk systems, your pricing systems are all aligned to make sure you’re capturing the business in a constructive manner,” he continued.

Brown said Ally needs to “make some operational changes” in order to boost that non-prime business, so the finance company can enjoy positive benefits. An example he shared was how much of Ally’s 9 million credit applications the company currently processes is completed through automated means.

“As we continue to refine the way we decision I think it’s going to provide us with a broader book,” Brown said. “I think we have the opportunity to book some of those in a very safe, proactive sound manner and get appropriate returns.”

While the talk about a subprime bubble permeated the industry last year, Brown is confident the market is in a position where Ally can succeed by taking on more risk into its portfolio.

“I would say there’s a lot more noise in the press than there is in reality,’ Brown said. “We’ve seen certainly within our portfolio credit perform actually better than expectations. Yes, losses have seasonally gone up, but I think for the most part within the retail book credit remains very clean and as you see the consumer continue to get healthier and healthier. I don’t expect any meaningful change there.”

Competition for Dealer Floor Plan Business

Along with ramping up its non-prime origination efforts, Brown emphasized how Ally isn’t backing down from increasing its footprint in the floor-plan and commercial financing spaces.

Brown highlighted Ally has a 64 percent penetration rate with GM dealers and a 44 percent penetration rate with Chrysler dealers in the floor-plan business. Ally brought in about 800 new dealership clients last year.

“We have the leading auto finance franchise that’s proven its ability to expand and maintain strong dealer customer relationships. We’ve been in this industry for nearly 100 years, and we have the best platform, service and sales force in the industry,” Brown said.

“These are relationships that require trust and confidence through all cycles,” he continued.

Part of that cycle includes stores going with another financing provider, which Brown acknowledged has happened since he previously oversaw Ally’s dealer financial services business.

When we tend to lose a dealer today, it’s not a function of service level was weak,” Brown said. “It’s more of a function of somebody’s out offering a below-market rate, an overly aggressive rate. My job is to try to balance how far do we go because we do have a differentiated service offering. Typically it’s not been uncommon for us over the past year or two that when we’ve lost accounts for people to come back to us say a year later because they recognize the service they’ve left behind. It is very competitive.”

And Brown described the competition for floor-planning business as “hand-to-hand combat,” especially since GM Financial now has a commercial offering for franchised dealerships of the parent automaker.

Brown indicated he already has been in contact with GM leadership since rising to the top of Ally this week.

“I feel very good about the relationship going forward,” Brown said. “They’ll continue to grow GMF, but I don’t think that should signal to anyone that Ally is out of the business. I think Ally will be a key partner to them. I want to embrace that relationship. I’m a believer we can win together.”

And Brown is confident Ally will continue to be a winner.

“The reality is a lot of banks compete for this business,” he said. “We are the 800-pound gorilla, and I would expect us to continue to be.”