With Chrysler Capital origination boost, Santander readies for FCA captive audition

Though Santander Consumer USA insists everything is business as usual regarding its relationship with Fiat Chrysler Automobiles, during the lender's second-quarter earnings call, executives couldn't help but brag about origination growth for the company's Chrysler channel.

FCA CFO Richard Palmer said in a June presentation near Turin that the automaker had initiated discussions to buy the Chrysler Capital channel from the lender and that buying out the channel could add $500 million to $800 million in incremental pretax earnings within four years.

Santander CEO Scott Powell pre-emptively steered those on the earnings call away from talk of the negotiations by stating that there were no developments to report but that "the discussions continue."

But Santander, which has supported the majority of originations for the company since 2013, is making the case that the channel flows strongest under its guidance.

As stated in the earnings call — which occurred just days after the death of former FCA CEO Sergio Marchionne in July — originations rose 45 percent across all of Santander's channels to $7.9 billion in the second quarter, driven largely by Chrysler Capital.

Chrysler Capital loan originations increased 51 percent to 2.7 billion, and lease originations increased 84 percent to 2.6 billion.

"In line with our positive origination trends, our average quarterly FCA penetration rate for the quarter was 32 percent, up from 20 percent in the prior-year quarter," Santander CFO Juan Carlos told analysts.

In the past, Santander has fallen short of FCA market share targets. Even 32 percent penetration is still less than half of the 65 percent mark it sought to reach by the end of April.

Nonetheless, business is on track, according to Powell. In Santander's campaign to become FCA's captive, this is a step in the right direction. But will it be enough?

You can reach Jackie Charniga at jcharniga@crain.com -- Follow Jackie on Twitter: @jccharniga

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