Chrysler 2013 Annual Report Download - page 223

222 Consolidated
Financial Statements
at 31 December 2013
Notes
33. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At 31 December 2013, the Group had pledged guarantees on the debt or commitments of third parties totaling €31 million (€50 million at 31
December 2012), as well as guarantees of €15 million on related party debt (€25 million at 31 December 2012).
SCUSA Private-Label Financing Agreement
In February 2013, Chrysler entered into a private-label financing agreement with Santander Consumer USA Inc. (“SCUSA”), an affiliate of
Banco Santander (the “SCUSA Agreement”). The new financing arrangement launched on May 1, 2013. Under the SCUSA Agreement,
SCUSA provides a wide range of wholesale and retail financing services to Chrysler’s dealers and consumers in accordance with its usual and
customary lending standards, under the Chrysler Capital brand name. The financing services include credit lines to finance dealers’ acquisition
of vehicles and other products that Chrysler sell or distribute, retail loans and leases to finance consumer acquisitions of new and used vehicles
at Chrysler’s dealerships, financing for commercial and fleet customers, and ancillary services. In addition, SCUSA work with dealers to offer
them construction loans, real estate loans, working capital loans and revolving lines of credit.
Under the new financing arrangement, SCUSA has agreed to specific transition milestones for the initial year following launch. If the transition
milestones are met, or otherwise satisfactory to Chrysler, the SCUSA Agreement will have a ten-year term, subject to early termination in certain
circumstances, including the failure by a party to comply with certain of its ongoing obligations under the SCUSA Agreement. In accordance
with the terms of the agreement, SCUSA provided Chrysler an upfront, nonrefundable payment of €109 million ($150 million) in May 2013,
which was recognized as deferred revenue and will be amortized over ten years. As of 31 December 2013 €102 million remained in deferred
revenue.
From time to time, Chrysler works with certain lenders to subsidize interest rates or cash payments at the inception of a financing arrangement
to incentivize customers to purchase its vehicles, a practice known as “subvention.” Chrysler has provided SCUSA with limited exclusivity
rights to participate in specified minimum percentages of certain of its retail financing rate subvention programs. SCUSA has committed to
certain revenue sharing arrangements, as well as to consider future revenue sharing opportunities. SCUSA bears the risk of loss on loans
contemplated by the SCUSA Agreement. The parties share in any residual gains and losses in respect of consumer leases, subject to specific
provisions in the SCUSA Agreement, including limitations on Chrysler participation in gains and losses.
Ally Auto Finance Operating Agreement and Repurchase Obligations
In April 2013, the Auto Finance Operating Agreement between Chrysler Group and Ally Financial Inc. (“Ally”), referred as the “Ally Agreement”,
was terminated. Notwithstanding the termination of the Ally Agreement, Ally will continue to provide wholesale and retail financing to Chrysler
dealers and retail customers in the U.S. in accordance with its usual and customary lending standards. Chrysler’s dealers and retail customers
also obtain funding from other financing sources.
In accordance with the terms of the Ally Agreement, Chrysler remains obligated to repurchase Ally-financed U.S. dealer inventory that was
acquired on or before 30 April 2013, upon certain triggering events and with certain exceptions, in the event of an actual or constructive
termination of a dealer’s franchise agreement, including in certain circumstances when Ally forecloses on all assets of a dealer securing
financing provided by Ally. These obligations exclude vehicles that have been damaged or altered, that are missing equipment or that have
excessive mileage or an original invoice date that is more than one year prior to the repurchase date.