In what has been one of the worst kept secrets in the auto industry, Santander Consumer USA today announced that it is acquiring a $3.2 billion auto loan portfolio of CitiFinancial Auto, and also will be servicing another loan portfolio of Citi's that amounts to $7.4 billion. SCUSA_Citi_Press_Release_062410.pdf

Shortly after the announcement I had a conversation with Matt Fitzgerald, Sr. Vice President of Marketing and Sales, I heard nothing but good things. Having known Matt for a number of years, I have no reason whatsoever to doubt him.

Indeed, with the recent stress ratings of European banks showing parent company, Banco Santander to be the number one ranked European bank, and with its acquisitions of Triad and HSBC portfolios performing well, I would say that Santander has nothing but sunny skies overhead currently, which should mean positive things for the dealer community.

Without a doubt the task of servicing the two combined portfolios (which amount to the addition of approximately 1,000,000 loans) could cause growing pains, but with this being the third significant acquisition in the last twelve months, it is certainly not unfamiliar territory. Additionally, a number of Citi's current 2100 employees are anticipated to make the move to Santander once the deal is complete which will certainly ease the process.

The time line to close the transaction, which must pass usual regulatory scrutiny, is in the third quarter of 2010. Until then, Santander and Citi both have stated to their dealers that it will be business as usual, and are faxing a message to all of their dealers this evening [SCUSA_Citi_Fax_062410_2.pdf ] apprising them of the deal.

I am excited for Santander, and congratulate their CEO Tom Dundon along with their entire U.S. team. Unlike the Wells/Wachovia merger, which I predicted would be a 1 + 1 = 1 deal for dealers doing indirect lending, this should be the opposite. Citi has been in turmoil ever since the banking crisis of late 2008. I have never doubted their leadership in auto but they seemed to become the red-headed step child within the company. I feel with the talent that is expected to come over, with Santander's strong performance and capital strength, that this time 1 + 1 may well be greater than 2.

The only dark spot in this entire deal to me is the loss of J. Michael Kane, the former Senior Vice President of the Client Services Group. Mike will be moving on, and to me that is a great loss. He had been with Citi for decades which included the acquisition of Auto One and Arcadia, and, has a terrific mind for both the industry and banking. The industry can only hope that he will reappear in a similar role with another financial institution.

With that lone exception, I feel that in general this is a good day for the auto industry, and I look forward to the completion of the deal and a smooth transition.