Chrysler Buys Consumer Finance Company From BankAmerica
DETROIT (AP) _ Chrysler Corp. will buy a BankAmerica Corp. subsidiary, FinanceAmerica, for $405 million in a transaction intended to give the automaker a greater stake in direct consumer lending, the companies announced today.
The agreement will make Chrysler Financial Corp., the automaker’s credit subsidiary, a more independent company with potential for significant growth and profits, Chrysler Chairman Lee Iacocca said.
″This purchase is the third and by far the biggest step CFC has taken in 1985 to expand and diversify its financial services beyond its 20-year role as an automotive finance company,″ he said.
Earlier this year, Chrysler Financial formed a joint venture with General Electric Credit Corp. and bought E.F. Hutton Credit Corp., renaming it Chrysler Capital Corp.
″With the addition of FinanceAmerica, CFC has become one of the nation’s largest and most diversified finance companies with a broad range of services in the automotive, real estate, equipment, insurance and commercial fields,″ Iacocca said. ″It puts Chrysler Corp. in the heart of the consumer finance business.″
Chrysler Financial’s purchase of the FinanceAmerica stock will be completed Nov. 30, Chrysler spokesman Robert Heath said.
The acquisition ″provides a shelter to earnings, with investment tax credits ...″ said Joseph Phillippi, automotive analyst with E.F. Hutton in New York. ″It also is a counterbalance to the basic up-and-down nature of the automotive business.″
FinanceAmerica, which consists of two BankAmerica subsidiaries, FinanceAmerica Corp. and BA Financial Services Corp., earned $15.8 million in 1984 and $9.9 million in the first half of 1985, and had $2.8 billion in assets on June 30.
The company’s 2,100 employees work at 267 offices in 42 states, including its Allentown, Pa., headquarters.
Chrysler Financial Corp. earned $83.1 million in 1984 and $67.4 million the first half of 1985, and had assets June 30 of $9.8 billion.
Iacocca said FinanceAmerica will also provide Chrysler Financial an advanced computer system to process retail loans.
″This computer system has such great potential that CFC and BankAmerica will enter into a joint venture to further develop and market it to other financial institutions,″ Iacocca said.
The other major domestic automakers have also acquired financial services companies in the past year.
General Motors Corp., through its subsidiary General Motors Acceptance Corp., bought Colonial Group of Mortgage Banking and Service Co. in May and bought Norwest Mortgage Inc. in July.
In August, Ford Motor Co. announced plans to acquire First Nationwide Financial Corp., holding company for the nation’s ninth largest savings and loan association.