FCA in Discussions to Buy Santander’s Chrysler Capital Portfolio

June 1, 2018

Reading Time: 2 mins read

Fiat Chrysler Automobiles Group confirmed earlier reports that it plans to form a U.S. captive finance arm and one of the ways it may get there is by buying the Chrysler Capital portfolio from Santander Consumer USA.

FCA Chief Financial Officer Richard Palmer made the announcement during an event in Italy that took place in the early hours of Friday morning U.S. time. He said the OEM has initiated discussions to buy the Chrysler Capital book from the lender, which would accelerate the company’s ability to grow profits compared with starting from scratch.

If FCA bought the book it would add $500 million to $800 million in incremental pretax earnings within four years, he said according to Bloomberg. Should FCA choose to start from scratch the company predicts $100 million in incremental profits over the same period.

Forming a captive will also allow the OEM to securitize vehicle fleets and offer financing and services on a per-mile basis and allow FCA to “participate more fully in capturing value from emerging platforms,” Palmer added.

During a press conference today, Santander expressed its interest in a future with FCA.

“We are a good partner to FCA and we expect to continue to compete today,” said Santander Chief Financial Officer Juan Carlos Alvarez de Soto.

Santander Chief Executive Scott Powell said that the companies’ interests are aligned throughout the early discussions between them. “We want to work toward giving them what they have the right to have for their benefit and our benefit,” he said.

In an earlier press release, Santander reiterated that it “underlying business remains strong, and our future growth potential and capabilities extend far beyond our relationship with FCA.” Yet, 46% of Santander’s total retail loans for the quarter were from its relationship with the manufacturer.

FCA also announced a number of changes to its line of cars including plans to phase out diesel vehicles in favor of electric cars, the expansion of a partnership with Google’s autonomous car project Waymo, expectations of doubling Jeep sales volume by 2022, an emphasis on Ram trucks, and the introduction of a Tesla-competing electric Maserati sports car.