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Cerberus to sell Chrysler Financial to Canadian firm

by Bill Cawthon on

TD Bank Group of Toronto (formerly Toronto Dominion) will pay $6.3 billion to acquire Chrysler Financial from Cerberus Capital Management. The all-cash transaction includes assets of $5.9 billion and approximately $400 million in goodwill. TD does not intend to issue common equity in connection with this transaction.

TD will gain all of Chrysler Financial’s processes and technology as well as its existing auto loan portfolio in the U.S. and Canada. With the acquisition, TD will be one of the top five bank-owned auto lenders in North America. Reuters reports that Cerberus will retain about $1 billion in non-auto lending assets.

TD is Canada’s second largest bank, and has expanded recently in the United States with numerous holdings including Commerce Bank.

In a joint statement issued by TD and Cerberus, Ed Clark, CEO of TD, said, “This transaction represents a unique opportunity to purchase a great organic growth platform at an attractive price. Chrysler Financial is a well-run business with the capacity for significantly higher returns over the next several years. This acquisition will allow us to leverage our lending expertise and financial strength to expand our presence in a large North American market with tremendous potential upside.”

By resuming origination of new loans and keeping Chrysler financial focused on the prime lending market, TD expects it could generate a return on invested capital of approximately 20% in three to four years.

Tom Gilman, CEO of Chrysler Financial will retain his position. In the joint statement, Gilman said Cerberus preserved Chrysler Financial’s technology, retained top talent and maintained key capabilities. This is in stark contrast to Cerberus’ treatment of Chrysler itself.

Pending regulatory approvals, the acquisition is expected to close in the second quarter of TD’s 2011 fiscal year. Following the completion of the transaction, TD expects to rebrand Chrysler Financial by spring 2011.

Cerberus’ initial investment in Chrysler was $7.4 billion. The sale of Chrysler Financial and the value of the remaining assets means the private equity firm will come close to breaking even on its investment.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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