Chrysler Financial Drops Industrial Bank Application
09 Juli 2009 - 10:30PM
Dow Jones News
Chrysler Financial has dropped plans to convert into an
industrial bank, raising further speculation about the future of
what was the auto maker's primary lending arm.
Almost all of Chrysler's consumer and dealer lending has been
transferred to the government-controlled GMAC Financial Services,
but Chrysler Financial still oversees a $45 billion loan book.
Conversion to an industrial-loan bank, first sought almost four
years ago, would have provided access to more liquidity and funding
from the federal government.
The company didn't rule out a new application, but its move
comes amid a planned crackdown by regulators on the lending arms of
non-financial companies.
"Chrysler Financial continues to evaluate all options and may
revise and file a new application for an industrial bank and
deposit insurance at a future date," the company said in a
statement Thursday.
Chrysler's move to drop the application last month marks the
first withdrawal since the U.S. proposed last month to overhaul
regulation of the lending arms of non-financial companies. Chrysler
Financial originally filed its application with the Federal Deposit
Insurance Corp. in May 2005.
General Electric Co. (GE) and other companies have pledged to
fight the regulatory proposals, which could force them to sell or
spin-off consumer lending units or accede to tighter oversight and
higher capital commitments.
Chrysler Financial, based in Farmington Hills, Mich., has been
in disarray since Chrysler, the auto maker, announced in May that
GMAC would be the primary lending source for Chrysler consumers.
The change was part of Chrysler's bankruptcy process. GMAC was
given industrial bank status earlier this year.
The change reduced Chrysler's Financial's portfolio, leading the
company to announce a 9% reduction in its work force in June. To
date, 110 of the 350 job cuts have been made. The remaining
positions will be eliminated when Chrysler Financial closes its
Kansas City, Mo., call center on Aug. 31.
Chrysler Financial continues to manage its portfolio of
outstanding loans to dealers and consumers worth around $45
billion. The company still writes some consumer loans.
Earlier this month, Chrysler Financial sold a $1.26 billion
consumer loan-backed deal under the Federal Reserve's Term
Asset-Backed Securities Loan Facility, or TALF program.
It is also seeking to extend $24 billion in short-term
financing, which was raised last summer through a group of 22 banks
including Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and
Royal Bank of Scotland PLC (RBS). The financing matures on July
31.
-By Jeff Bennett and Kate Haywood; jeff.bennett@dowjones.com;
248-204-5542
(Doug Cameron and Anusha Shrivastava contributed to this
report.)