Fiat Chrysler (FCA) (FCHA.MI) wants to set up its own car financing business in the United States under a new five-year plan and is in talks with Santander Consumer USA (SCUSA) (SC.N) to buy its share in their joint venture.
The car maker has an agreement with SCUSA, a unit of Spanish bank Santander (SAN.MC), to fund retail and wholesale purchases of its vehicles.
Fiat Chrysler CEO Sergio Marchionne said on Friday the group had realized that not owning a financing unit had hindered FCA’s retail expansion in the United States.
Chief Financial Officer Richard Palmer said FCA had an option to buy SCUSA’s share in their Chrysler Capital JV and had started preliminary discussions for a possible acquisition.
The CFO added that, as an alternative to a possible deal, FCA could also pursue its goal of an in-house financing business through a start-up.
Palmer said the group expected to return to an investment grade credit rating by the end of next year, after achieving a landmark goal to erase its debt load by mid-2018.
“Given our strong financial performance and improving credit profile we believe the time is right to pursue a captive Finco (financial company) in the United States,” FCA said in slides as it presented its new plan to 2022.
FCA said Chrysler Capital accounted for 26 percent of all financed deals for the purchase of an FCA vehicle in the United States while Fincos belonging to rivals reached a market share of 50-75 percent.
“Captives provide not only material earnings but also a key strategic asset which assists (manufacturers) to sell cars and build relationships with customers. The last point being pertinent in the world of future ‘mobility’,” Evercore ISI analysts wrote in a note.
The group said in slides an in-house financing business could boost a U.S. car business’ earnings by between 10-25 percent.
