Financial Subsidiary Expanding Beyond Auto Market : Chrysler Unveils Joint Venture With GE Unit
Chrysler Corp. told shareholders Friday that its finance arm has tentatively agreed to establish a joint venture with General Electric Credit Corp.
“It’s a natural extension of our lending business,” Chrysler Chairman Lee A. Iacocca told about 400 shareholders attending the company’s annual meeting at the Anaheim Hilton.
It was the Detroit auto maker’s first shareholder meeting in California, and many shareholders came with copies of Iacocca’s best-selling autobiography. A line formed after the meeting, with shareholders waving their books for Iacocca’s autograph.
Financial arrangements of Chrysler Financial Corp.’s joint venture, to be called CGE Associates, were not disclosed by either company, although Iacocca said the operation will finance machinery, equipment and real estate.
The move will open a new lending market to cash-rich Chrysler Financial, which posted record 1985 first-quarter profits of $31.8 million. The joint venture will allow Chrysler to “diversify beyond its involvement as an automotive finance company” said Gerald Greenwald, Chrysler’s vice chairman. Until now, the company’s loans have been limited to car and truck buyers at its Chrysler, Plymouth and Dodge dealerships.
A Chrysler spokesman later acknowledged that the move was a “first step” toward yet further diversification of Chrysler Financial.
A wholly owned subsidiary of Chrysler Corp., Detroit-based Chrysler Financial posted an all-time high financing volume of $5.3 billion in the first quarter. General Electric Credit, headquartered in Stamford, Conn., had total assets of $18.5 billion at the end of 1984.
In its first public display, Chrysler also rolled out a prototype of the company’s small car of the future. The prototype is the backbone of Chrysler’s Liberty Project, which Iacocca insisted Chrysler will introduce before General Motors markets its much-publicized “Saturn” cars sometime around 1990.
“If it looks boxy, don’t worry,” Iacocca assured shareholders, who seemed disappointed at the car’s resemblance to a number of current hatchbacks. “This is not what the final product will look like.” Chrysler has already spent more than two years on the project, which is designed to use high technology to compete with Japan’s current supremacy in the small-car market. The car will average up to 65 miles per gallon and rival Japanese subcompacts in price.
Iacocca said the company’s decision to meet in Anaheim was no accident. “If you’re going to do well in America, you’ve got to do well in California,” he said, noting that Chrysler has boosted its California sales by 75% since 1982. California accounts for 10% of all U.S. car sales.
After the meeting, Iacocca told reporters that, following talks with Mitsubishi Motors Corp. officials Thursday, a location for a previously announced small-car joint venture between the two companies had been narrowed to five Midwest states: Michigan, Kentucky, Illinois, Indiana and Ohio.
