Look out Ally, Santander Consumer: Here comes Fiat Chrysler

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Remember the old Chrysler Credit? It's baaaaack ... sort of.

Sergio Marchionne, in what's said to be his last hurrah before retirement next year as CEO of Fiat Chrysler Automobiles NV, is expected to lay out his vision for the car maker's future at an event scheduled for Friday in Turin, Italy.

The five-year strategic blueprint will likely include plans for Fiat Chrysler to set up its own captive finance unit in the U.S., Bloomberg News reported Wednesday, citing people familiar with the matter. Structurally, the unit would resemble its American competitors.

The prospect of Fiat Chrysler starting up its own lending arm could spell trouble for Santander Consumer USA Holdings, a major auto-finance partner of the carmaker. Shares of Dallas-based Santander plunged as much as 9.6%, the steepest intraday drop since July 2016. They recovered slightly, falling 6.5% on the day.

Santander Consumer has struggled to reach market share targets that it set along with Fiat Chrysler as part of the 10-year financing agreement the two companies inked in 2013. The lender financed 28% of Fiat Chrysler’s total loans and leases as of the end of December, well short of a goal to reach 65% by the end of April, according to a regulatory filing.

Last August, Santander CEO Scott Powell met with Fiat Chrysler executives during his first day on the job to find ways to capture more business.

“We can’t speculate on [Fiat Chrysler's] strategy for its U.S operations,” Santander said in an emailed statement. “Santander is the preferred provider for [Fiat Chrysler's] consumer loans and leases and dealer loans via Chrysler Capital, and we continue to operate in the existing agreement.”

The lender’s financing agreement with Fiat Chrysler can be terminated if Chrysler Capital fails to meet origination goals within the first five years, according to Santander filings, which note that this could have a “materially adverse impact” on its business.

A captive lender at Fiat could also pose problems for Ally Financial. The bank originated $2.44 billion of loans and leases for Fiat Chrysler dealers last year, which was more than a quarter of its consumer automotive business, according to a regulatory filing.

Ally shares fell as much as 3%; they ended up falling nearly 1.2% on Wednesday. A representative for the Detroit-based company didn’t immediately respond to a request for comment.

Bloomberg News