One element of the proposed merger of Fiat Chrysler with Renault that has gotten little attention: the French automaker's ability to provide the Italian-American one with a captive finance company.
After operating without a captive for nearly a decade, former FCA CEO Sergio Marchionne told investors in June 2018 that FCA would launch its own captive, either by acquisition or by building a finance company.
A year later, a possible merger with Renault could give FCA a captive opportunity through Renault's finance company, RCI Financial Services. But the potential tie-up doesn't necessarily mean Santander — well into a 10-year partnership with FCA — will be kicked to the curb.
"The merger adds a layer of complexity into the entire conversation," said Jim Houston, senior director of the automotive finance practice at J.D. Power.
When FCA proposed developing its own captive last year, there was speculation that such a move would roil Santander Consumer USA, which has backed a large share of FCA's auto loans under the private-label Chrysler Capital brand since 2013.
Marchionne made his dissatisfaction with Santander public last year. "If we had had proper service in this market, then we would not have had these issues that we have today," he said in June 2018. Marchionne died the following month and Mike Manley became CEO.
Since Marchionne's presentation, Santander has boosted its Chrysler Capital business. The lender financed 31 percent of FCA's loan and lease originations, up from 28 percent the previous year — though still short of the 65 percent target it aimed to reach by April 2018, according to a filing with the Securities and Exchange Commission. But Santander "continues to make strides to satisfy dealers," said Houston, who oversees J.D. Power's dealer financing satisfaction surveys.