February 9, 2012 / 1:50 AM / 8 years ago

Chrysler in talks to create financing JV-sources

CHICAGO, Feb 8 (Reuters) - Chrysler Group LLC is in talks with banks to create a financing joint venture that would help the U.S. automaker build on its recent sales momentum, two people familiar with the matter said on Wednesday.

The automaker hopes to have a deal in place by the first half of 2012, a year before its current pact with Ally Financial expires, one of the sources said.

Under this deal, Chrysler would offer loans and leases to consumers as well as “floor plan” financing for dealers to help them order cars and trucks, the two people said. Chrysler’s current arrangement with Ally does not include floor-plan financing.

One model for Chrysler is the deal between Italian automaker Fiat SpA and Credit Agricole that was forged in 2006. Under that joint venture, the bank provides the financing and Fiat manages the dealer network.

Ally, formerly GMAC Inc, is among the banks under consideration by Chrysler, one source said. The Wall Street Journal, which first reported the news, said Chrysler is also in talks with JP Morgan Chase & Co.

JP Morgan could not be immediately reached for comment. Ally and Chrysler declined to comment.

Fiat owns 58.5 percent of Chrysler. Both automakers are led by Chief Executive Sergio Marchionne, who took over after Chrysler’s government-funded bankruptcy restructuring in 2009.

Marchionne is credited with steering Chrysler from the brink of collapse. The company’s improving finances have attracted the attention of Wall Street.

Chrysler has also generated buzz with its slogan “Imported from Detroit” and, more recently, a controversial two-minute Super Bowl advertisement recently featuring Academy Award-winner Clint Eastwood. The company forecast that its annual operating profit would rise 50 percent to $3 billion in 2012.

A broader range of financing options for dealers and consumers would allow Chrysler, the smallest of the three Detroit automakers, to take better advantage of its improving position in the growing U.S. auto market, the people said.

In January, Chrysler sales rose 41.5 percent, while the broader industry, which logged its best sales rate since August 2009, saw an increase of 11.4 percent, according to Autodata, which tracks auto sales and incentives.

Of the three Detroit automakers, Chrysler is the only one without a dedicated financing arm. In the run-up to its initial public offering in 2010, General Motors Co decided to buy AmeriCredit Corp for $3.5 billion cash.

The move was intended to resolve a major investor concern and satisfy GM dealers who complained that a lack of financing options cost them sales.

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