Chrysler Financial is now a separate company, distinct from the Chrysler automobile company; the new owners of Chrysler (Cereberus Capital Management LP) structured their purchase of Chrysler this way with the intention of making Chrysler Financial a separate, money-making entity. I expect that the disaggregation of these entities will eventually cause Chrysler Financial to make loans from a perspective of a finance company, not an auto company; that may or may not make sense from Chrysler's perspective, since a slightly lower profit for Chrysler Financial may result in a larger profit from Chrysler.
The UAW bailout package (commonly known as the "Detroit" or "Big Three" bailout package) from the U.S. government allocated $1.5 billion to Chrysler Financial to make loans. Now I've seen two conflicting reports on the result of the disaggregation of Chrysler and the UAW bailout loan. One report seems to claim that dealers benefit under the new structure; another article claims that Chrysler dealers are "hobbled" by the new arrangements and can't get sufficient loans.
Ordinarily disaggregation would drive efficiencies into the entire system. Given that the larger goal of the automobile companies depends on the sale of cars and that financing is a means to an end, I'd need a lot more research before I could decide if the disaggregation of Chrysler Financial makes sense.
Topics: · business · finance · recession
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