Santander's role as FCA US main finance partner is unlikely to change in the short run, experts said, but Fiat Chrysler Automobiles' plan-ned merger with PSA Group bolsters the possibility a captive lender will be created for the U.S.
Santander Consumer USA has backed a large share of FCA's auto loans under the private-label Chrysler Capital brand since 2013, while Ally Financial has been a key supplier of lease funding.
FCA CEO Mike Manley this spring — shortly before a failed merger proposal with Renault — backed away from his predecessor's plans to buy or build a captive lender. But an in-house finance arm, which Renault could have provided, creates strategic advantages in the cyclical auto industry that the maker of Jeep SUVs and Ram pickups likely won't ignore for long.
"It was always Chrysler's intention to create its own finance company," said Maryann Keller, automotive industry analyst and principal at Maryann Keller & Associates. "With a partner at the scale of Peugeot, maybe that would be the opportunity to go ahead and do it."
Captive finance companies benefit automakers in myriad ways, Keller said, not the least of which is their focus on supporting vehicle sales and dealer operations in good times and bad.
"Santander has lots of other responsibilities and lots of other business apart from" FCA, she said. "That's something not ideal for an automaker. They want to have their own captive. All auto companies that get to that level of volume realize that's the most efficient way to operate."
The easiest solution may be for PSA Group's captive, Banque PSA Finance, to expand to the U.S., said Michael Buckingham, senior director of automotive finance at J.D. Power.
"You've got a built captive already," he said of the PSA unit. "You see they've been around a long time. They're not an upstart."
But PSA may choose to wait until it is selling its own vehicles in the U.S. before launching a local captive, said Zo Rahim, Cox Automotive manager of economics and industry insights.
"Maybe when the product for PSA does come fully into market — whether through mobility solutions or actual vehicles — you could see the possibilities for gauging the market and appetite for creating their own captive," Rahim said. "The sales and the products would come first, before the captive does."
For now, Santander's relationship with FCA looks safe, said Christopher Donat, managing director of equity research at Sandler O'Neill and Partners.
"There's nothing with PSA that would potentially displace Santander Consumer's financial relationship with Fiat Chrysler," Donat, who lists Santander and Ally among his clients, said before the merger was announced. "Whoever FCA merges with, if they don't have a U.S. presence, they're still going to need a financing relationship."
Santander Consumer Finance, the parent company of Santander Consumer USA, has deep ties with Banque PSA Finance. Together, the companies operate a joint venture, PSA Banque France, which is run in equal parts by Banque PSA Finance and Santander Consumer Finance's French subsidiary, according to company reports.
In any case, Santander Consumer USA, of Dallas, likely won't relinquish its hold on FCA business without a fight. In its third-quarter earnings last week, the auto lender reported a 52 percent jump in Chrysler Capital loans to $3.6 billion.
CEO Scott Powell said Santander has "a great relationship" with FCA, while he declined to comment on the possibility of a merger.
"We take care of what we can take care of, and if the world changes, then we'll deal with that."