Chrysler is calling it “preferred” quits with Ally Financial — a year from now.
Late last night, Chrysler announced it will not renew its preferred partnership, which offers incentivized loans, with Ally. Chrysler’s preferred partnership with the lender will expire after April 30, 2013. This news could mean that the automaker will establish its own in-house lending arm.
Ally has served as a primary lender for Chrysler since the automaker emerged from bankruptcy in June 2009. In 2011, Ally financed 31.6% of Chrysler’s U.S. customers last year and 66.7% of its dealers, according to The Wall Street Journal.
Two months ago, Chrysler CEO Sergio Marchionne began talks with major lenders about a possible change to Chrysler’s lending operations and opened the bidding for two possible scenarios: a captive-type joint venture or a private-label lending arrangement. The candidates include: Wells Fargo, Santander Consumer USA, General Electric Capital Corp., U.S. Bancorp, and JPMorgan Chase & Co. With more than $25 billion in auto loans annually at stake, Chrysler’s business has sparked some serious interest.
But Ally may not disappear completely from the Chrysler arena, as it plans to continue competing to offer other loans to Chrysler dealers like inventory financing and consumer loans under standard rates.
In February, Ally Financial ranked No. 1 in financing consumer auto sales in the U.S., according to AutoCount by Experian Automotive. Ally accounted for more than one in every 11 vehicles financed in the U.S. in 2011, with more than $40 billion in consumer financing contracts for new or used cars and trucks. Today, the lender released first-quarter earnings, posting $611 million of pretax profit in its auto finance business, down from $680 million year over year, but up from $592 million in the prior quarter.
Chrysler also reported today strong first-quarter earnings and sales, proving the automaker is continuing to make a comeback after its 2009 reorganization. For 1Q12, Chrysler earned $473 million, quadrupling its earnings of $116 million from 1Q11.
