Santander Consumer USA and Fiat Chrysler Automobiles have updated their private-label financing agreement, Santander said Monday. The lender will make a one-time $60 million payment to FCA as part of the amended agreement.
In 2013, FCA and Santander signed a 10-year financing agreement, under which the Chrysler Capital brand was established. At that time, Santander paid a $150 million fee.
The updated contract recalibrates performance targets and removes a tolling agreement, according to a statement from Santander. The tolling agreement put the contract on hold, meaning that both companies operated under the agreement as it stood on April 30, 2018.
The status of the 2013 financing agreement was thrust into question in June 2018 when then-CEO Sergio Marchionne told investors that FCA would launch its own captive, either by acquisition or by building a finance company.
During FCA's first-quarter earnings call in May, however, current CEO Mike Manley signaled that FCA put its captive plan on hold. "We are going to stay with the arrangements that we have working with Chrysler Capital in the in the U.S.," he said.
FCA said in a statement that it looks forward to continuing its relationship with Chrysler Capital. The $60 million payment, according to the company, "is part of a negotiated resolution of open matters. FCA has no additional comment on the structure of its relationship with Santander."
The agreement, however, does not preclude FCA from spinning off its own captive finance company at any time, according to the company.
The tolling period began in July 2018, a month after FCA proposed the idea of building its own captive, according to documents filed with the U.S. Securities and Exchange Commission. Under a tolling agreement, companies put a hold on the statute of limitations as they negotiate specific terms over a period of time.
According to Laurie Kight, senior vice president of communications at Santander Consumer USA, the tolling agreement, "prevented the parties from delivering notices under the existing contract while we had ongoing discussions to find a mutually beneficial path forward."
The adjusted performance targets, part of the amended agreement, were not disclosed to the public.
Santander Consumer CEO Scott Powell said in his company's statement that the amended contract is "mutually beneficial" and "establishes an operating framework for the remainder of our contract and positions us to continue to help FCA succeed."