Chrysler 2015 Annual Report Download - page 226

226 2015 | ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
28. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December31, 2015, the Group had pledged guarantees on the debt or commitments of third parties totaling €19
million (€27 million at December31, 2014), as well as guarantees of €4 million on related party debt (€12 million at
December31, 2014).
SCUSA Private-Label Financing Agreement
In February 2013, FCA US entered into a private-label financing agreement (the “SCUSA Agreement”) with Santander
Consumer USA Inc. (“SCUSA”), an affiliate of Banco Santander, which launched on May1, 2013. Under the SCUSA
Agreement, SCUSA provides a wide range of wholesale and retail financing services to FCA US’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 FCA US
sells or distributes, retail loans and leases to finance consumer acquisitions of new and used vehicles at independent
dealerships, financing for commercial and fleet customers, and ancillary services. In addition, SCUSA offers dealers
construction loans, real estate loans, working capital loans and revolving lines of credit.
The SCUSA Agreement has a ten-year term from February 2013, 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 an upfront, nonrefundable payment of €109 million
(U.S.$150 million) in May 2013, which was recognized as deferred revenue and is amortized over ten years. At
December31, 2015, €101 million (U.S.$110 million) remained in deferred revenue.
From time to time, FCA US 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.” FCA
US 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 FCA US participation in gains and losses.
Other Repurchase Obligations
In accordance with the terms of other wholesale financing arrangements in Mexico, FCA Mexico is required to
repurchase dealer inventory financed under these arrangements, upon certain triggering events and with certain
exceptions, including in the event of an actual or constructive termination of a dealer’s franchise agreement. These
obligations exclude certain vehicles including, but not limited to, 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. In December 2015, FCA Mexico entered into a ten year private label financing agreement with FC
Financial, S.A De C.V., Sofom, E.R., Grupo Financiaro Inbursa (“FC Financial”), a wholly owned subsidiary of Banco
Inbursa, under which FC Financial provides a wide range of financial wholesale and retail financial services to FCA
US’s dealers and retail customers under the FCA Financial Mexico brand name. The wholesale repurchase obligation
under the new agreement will be limited to wholesale purchases in case of actual or constructive termination of a
dealer’s franchise agreement.
At December31, 2015, the maximum potential amount of future payments required to be made in accordance
with these wholesale financing arrangements was approximately €275 million (U.S.$299 million) and was based on
the aggregate repurchase value of eligible vehicles financed through such arrangements in the respective dealer’s
stock. If vehicles are required to be repurchased through such arrangements, the total exposure would be reduced
to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than €0.1 million
at December31, 2015, which considers both the likelihood that the triggering events will occur and the estimated
payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of
such events. These estimates are based on historical experience.