Why Stellantis buys the American First Investors Financial Services
Stellantis was until now the only group active in the United States not to have a financial company owned by it. What changes with the First Investors Financial Services deal
Stellantis will soon have its own financial company in the United States, in order to support sales without having to resort to external partners and to fully capitalize on its market position. Without forgetting another goal: to create value for its shareholders in the long term.
The automotive group has announced that it has entered into a definitive agreement for the acquisition of FIFS Holdings Corp., the parent company of First Investors Financial Services Group, an independent auto finance company operating in the United States of America.
WHAT STELLANTIS WILL DO WITH FIRST
The transaction, settled entirely in cash, has a value of approximately 285 million dollars, the latter being subject to adjustment linked to the closing of the financial statements and the exercise of some options.
The transaction is expected to be finalized by the end of 2021 and is subject to the usual conditions and regulatory approvals.
Stellantis is the only major builder currently operating in the United States without a proprietary finance company.
The transaction concluded contributes to significantly improve the experience linked to car ownership and connectivity services for customers who purchase Jeep, Ram, Dodge, Chrysler, Fiat and Alfa Romeo vehicles. It will also offer Stellantis future opportunities to develop new business strategies.
THE IMPORTANCE OF A CAPTIVE FINANCIAL COMPANY
The strategies of car manufacturers have for some time now included the offer to the customer of financial and insurance services, which on the one hand favor sales processes and on the other increase profits, disconnecting them from the vehicle's “iron” alone. Ford and General Motors own internal holding companies (defined as “captive”) from which about 10% of revenues derive. Stellantis has so far exploited the agreement with Santander (signed in 2013 and expiring in 2023 which will probably not be renewed ) from which it extracts revenues equal to 1% of the total. To better understand the extent of the auto finance business, it is sufficient to say that in 2020 approximately 88% of Stellantis retail sales in the United States were made through financing or leasing.
Sergio Marchionne had understood this and already in 2018 he had hypothesized a change of strategy, hypothesizing either the assumption of control of the collaboration with Santander or the establishment of a new captive financial company. Having a captive finance company not only increases profits, but allows you to modulate financial services that are much more consistent with the characteristics of the products. With the undeniable advantage of providing "tailor-made" products and calibrating the equity of the formulas focused on Trade Circle Management (TCM): plan the change of the car according to a short cycle of replacement, every 2 or 3 years, offering the customer a guaranteed future value of the vehicle and a fresh used fleet constantly replenished to the dealer network.
TAVARES (STELLANTIS): "A MILESTONE IN THE STELLANTIS STRATEGY"
Carlos Tavares, CEO of Stellantis, said: “This transaction marks a milestone in Stellantis' sales financing strategy in a strategic market like the United States. First Investors has an outstanding financial and operational platform, backed by a strong management team, with extensive experience in the automotive financing field. Ownership of a financial company in the United States is an opportunity that will allow Stellantis to develop a full range of financial products for our customers and dealers in the short to medium term, including retail and leasing loans and network financing.
MOORE (FIRST INVESTOR): "LONG-TERM STABILITY FOR OUR COMPANY"
Tommy Moore, Jr, President and CEO of First Investors, noted, “We are thrilled to join the Stellantis team. Joining Stellantis provides long-term stability for our company and our employees. We believe that under the new ownership, there are significant growth opportunities for First Investors, expanding our product offering to support Stellantis' growth in auto sales. First Investors' management team is fully committed to ensuring a quick and smooth integration into the Group. In the meantime, we remain committed to continuing to offer our loans and services to our dealer network and existing business partners ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/stellantis-first-investors-financial-services-group-acquisizione/ on Thu, 02 Sep 2021 11:42:51 +0000.