Santander Consumer will pay $60M to remain a Fiat Chrysler partner

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Santander Consumer USA Holdings will make a one-time payment of $60 million to Fiat Chrysler Automobiles under an updated agreement that is expected to stabilize the lender’s most important partnership.

The partnership, known as Chrysler Capital, accounted for roughly 63% of Santander Consumer’s $7 billion in auto loan and lease originations during the first quarter of 2019.

Questions about the partnership’s future have lingered since May 2018, when Fiat Chrysler said that it was planning to form its own financing unit. One year later, Fiat Chrysler CEO Mike Manley made remarks that indicated the Italian-American automaker was shelving that plan.

The agreement that was announced Monday is an amendment to the 10-year contract that the two companies signed in 2013. Under the six-year-old deal, Dallas-based Santander Consumer is the automaker’s preferred provider for consumer loans, consumer leases and dealer loans.

Some parts of the revised agreement were redacted in a copy filed with the Securities and Exchange Commission. It was unclear Monday what specifically Santander Consumer will get in exchange for the $60 million payment.

Christopher Donat, an analyst at Sandler O’Neill, said that the updated agreement should remove some doubts about whether the relationship will end abruptly. “But we lack a whole lot of insight into it,” he added.

Santander Consumer CEO Scott Powell said in a press release that the revised agreement establishes an operating framework for the remainder of the contract. “We are pleased to have reached a mutually beneficial agreement that strengthens our partnership,” he said.

Shares in Santander Consumer were up 3.8% in late-session trading Monday, outpacing market gains. But those gains also followed the auto lender’s announcement on Friday that it will increase its dividend and authorize up to $1.1 billion in stock repurchases through the second quarter of next year.

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Auto lending Auto leasing Consumer lending Santander Consumer USA Chrysler