As non-executive vice-chairman of the Swiss bank UBS, Chrysler CEO Sergio Marchionne has deep connections with the European banking community. Now, under threat of losing its primary lender Ally Financial to GM’s dreams of a return to in-house, subprime lending, Marchionne has leveraged that experience into a non-prime lending deal with a US division of Spain’s Banco Santander. Automotive News [sub] reports that Santander and Chrysler have reached a deal to provide loans to Chrysler customers with sub-650 credit scores that ChryCo reckons could result in an additional 2,000 sales each month.
Chrysler and Santander already enjoy close ties, as about half of all Chrysler dealers use the Spanish bank for used-car financing. And that’s not all: Fiat-owned Scuderia Ferrari recently closed a deal in which Santander would become a major sponsor of its Formula One team. Under the just-closed Chrysler subprime deal, Santander will save non-prime customers 30 percent on their car loan costs, which works out to about $3,000 in savings over the life of the loan. According to Chrysler, some 22 percent of its customers fall into the credit-score range addressed by the new program.
But the Chrysler-Santander deal isn’t being done on the strength of close ties alone. AN [sub] reports that Chrysler is subsidizing these subprime loans, although officials are refusing to disclose the size or nature of this investment. The only thing that Chrysler spokesfolks will say is that:
Santander specializes in this credit market. They know how to finance it. They don’t do prime lending. They have plenty of money. There is not a liquidity issue.
Your move, GM.