Chrysler close to lender agreement in U.S., Marchionne
September 30, 2012
PARIS (Bloomberg) – Chrysler Group is close to an agreement to replace Ally Financial Inc. as its primary lender to dealers and customers, CEO Sergio Marchionne said in an interview.
JPMorgan Chase & Co. and Santander Holdings USA are “possible” partners for Chrysler, Marchionne said. The automaker may reach pacts with more than one lender, he said in February.
“We’ll announce the deal at the right time,” Marchionne said on the sidelines of the Paris auto show. “We’re close.”
Chrysler said in April that the automaker would let its operating agreement with Ally expire in April 2013. The pact requires Chrysler to allow Ally to finance a minimum percentage of vehicles sold with subvented loans, which are those made to consumers at below-market rates, according to a regulatory filing. Automakers pay lenders to make up the difference.
Chrysler generates more than $25 billion in auto loans annually, people familiar with the matter said in February. Subvented loans with Chrysler accounted for about 5 percent of Ally’s total U.S. consumer originations in the first quarter, according to an Ally filing released after Chrysler notified that it would let their agreement expire.
The expiring accord doesn’t cover other business Ally does with Chrysler dealers, such as wholesale financing, so-called standard-rate financing for consumers or leasing, according to Ally.
Ally CEO Michael Carpenter is trying to repay U.S. bailouts exceeding $17 billion that left the Treasury Department with a 74 percent stake.
“Ally competes on a whole variety of products, not just subvented, but standard-rate loans, and wholesale financing, insurance, and so on, head-to-head in the marketplace with all other competitors, and we do so very successfully,” Carpenter said on an Aug. 1 conference call.
“That isn’t to say that the relationships with the OEMs are not important. But they no longer define us or constrain our potential.”
Ally has a similar preferred-lender agreement with General Motors Co. that expires in December 2013.
Santander, JPMorgan, Wells Fargo & Co., General Electric Capital Corp. and U.S. Bancorp are among lenders that negotiated with Chrysler about its auto-financing needs, three people familiar with the talks said in February.