Will Chrysler Financial Set Its Sights on Competing with Ally?

Competition between Ally Financial and Chrysler Financial for dealer relationships and market share could heat up in the near future.

The former GMAC is expected to push out an initial public offering sooner than initially anticipated by the government and Chrysler Financial just recently received renewed capital in the form of its new parent TD Bank Group.

In testimony to the Congressional Oversight Panel for the Troubled Asset Relief Program in Washington, U.S. Treasury Secretary Timothy Geithner said his team is working ”very hard” with the Ally management and board to get everything lined up for an IPO as quickly as possible, according to a report from Bloomberg.

“I don’t know how quickly (the IPO will come) but it’s going to be much sooner than we thought six months ago,” Geithner predicted.

Meanwhile, news broke just before the holidays that Toronto-Dominion Bank Group is stepping in to acquire Chrysler Financial. The bank group expects to rebrand Chrysler Financial under its logo by spring.

Interestingly, Cerberus owned large stakes in Chrysler and Chrysler Financial, as well as GMAC.

GMAC was rebranded Ally Financial not long after receiving bank holding status and bailout funds from the government. Once the IPO comes to pass, the government is looking to slowly unwind itself from Ally.

As part of the bailout deal, GMAC became the preferred provider of indirect auto loans, floor planning and such for Chrysler dealers, as well as General Motors dealers.

A few years ago, GMAC served as General Motors’ captive, but the automaker ended up selling off a majority stake in the lender to Cerberus in what appeared to be an effort to raise capital to stave off bankruptcy.

While the bankruptcy ultimately became a reality for the automaker, GMAC had already begun seeking out relationships with non-GM dealers to expand its portfolio base.

This could have been part of the thinking in the government awarding the institution the preferred lender status for Chrysler dealers as well as GM dealers.

Chrysler also received government bailout funds, but as a byproduct of GMAC’s bailout deal with the government, Chrysler Financial was forced to cut auto loans and focus on remarketing and selling some insurance products to dealers.

Fiat stepped in to grab a Chrysler stake to bring the automaker out of bankruptcy, which ultimately left Chrysler Financial to fend for itself.

Now that Chrysler Financial has the backing of TD Bank Group, it is expected to ramp back up auto lending and seek new dealer relationships.

The new parent company revealed it is looking for Chrysler Financial to focus on the prime market. The auto lender will be headquartered in Toronto with its current chief executive officer remaining at the helm.

“Joining forces with TD will benefit both our customers and our dealer network,” noted Tom Gilman, CEO of Chrysler Financial, at the time the news broke.

“Under Cerberus’s ownership, Chrysler Financial has preserved its technology platform, retained top talent and maintained key capabilities. The transaction positions us for future growth with the financial strength of TD, one of the soundest, best capitalized and best-managed banks in the world,” the CEO added.

The stage is now set for Chrysler Financial to seek out relationships with non-Chrysler dealers and renew its auto lending and floor planning platforms. However, it appears Ally has a large head start thanks to the government deal as well as its ability to ramp up loans much sooner.