CHICAGO Chrysler Group
LLC has told Ally Financial Inc. that when its lending
agreement ends in 12 months, the automaker will shop around for
its consumer financial-services needs.
Unlike other automakers,
Chrysler did not have Detroit-based Ally as a captive finance
arm of the company. Chairman and chief executive officer Sergio
Marchionne spoke in strong terms against such arrangements,
blaming easy credit for the recession that struck automakers so
"I never believed it was a
requirement that we own captive finance to support our
manufacturing and distribution," said Marchionne, noting that
outside banks have readily supported parent Fiat SpAs
Contracting with Ally was the
only way Chrysler could support its sales in the U.S. and
Canada after the company emerged from bankruptcy in 2009. But
Marchionne said that "a lot has changed in three years," and
described the brand as "sufficiently strong to support the
naming of a finance organization that reflects the corporate
existence and the viability of Chrysler as a carmaker."
"Our primary objective in life
is to manufacture and sell cars," he said. "The financing
(business) has, in a lot of ways, been at the heart of a lot of
the ills in the U.S. market. They built up unrealistic volumes
because of the ease of access to capital."
An additional risk of having a
captive credit division is that a company then commingles its
industrial decisions with its financial decisions, Marchionne
said. As a consequence, "you end up driving the industrial
machine in the wrong direction because you get a cheap answer
on the financing side. That will never happen to Chrysler. It
"As long as I outsource the
credit position, Im forced to be disciplined," he said.
"Do I make as much money as the guy who has captive finance?
Undoubtedly Ill make less, but at least the industrial
machine cannot get polluted."
Keeping the two businesses
separate allows a company to avoid temptation, he said. "If you
want to stop drinking, dont hang around the bar."
Ally Financial said
Chryslers decision not to extend its lending agreement
was expected. During the banks earnings conference call
last week, chief executive officer Michael A. Carpenter said
that Chryslers retail loans comprise 3 percent of
Allys earnings assets. "We expect to continue to play a
significant role with the Chrysler dealer network," he