FARMINGTON HILLS — With executives and employees on hand at the former Detroit-area home of Chrysler Financial, TD Auto Finance announced on June 10 that it’s open for business.

The new company was formed after the April acquisition of Chrysler Financial by Toronto-based TD Bank Group, which added its existing auto loan business to the former captive’s portfolio, reported F&I and Showroom.

“It’s great to be here in Chrysler Financial’s hometown of Farmington Hills to announce our exciting new TD Auto Finance brand, which represents both the financial stability and renowned customer service of TD and the deep experience and partnerships of the former Chrysler Financial,” said Thomas F. Gilman, president and CEO of TD Auto Finance.

Sources close to the company said that TD Auto Finance has signed 6,200 U.S. dealers since December. Half of those are new relationships for the former captive, and about 22 percent are Chrysler dealers. The focus of the initial lending program will be on prime buyers, with no specific timeline for adding subprime, nearprime, leasing and floorplan financing programs.

“TD Auto Finance is off to a strong start, with thousands of new dealers signed up both in Canada and the United States since December and many more poised to come aboard,” Gilman said. “Dealer and customer feedback for our products and programs has already been overwhelmingly positive.”

Toronto-Dominion Bank Chief Executive Officer Edmund Clark said the bank may “surprise” investors this year with the performance of its U.S. consumer bank and the growth of auto lender Chrysler Financial Corp.

“I think we will surprise the market with how well we’ll do operationally,” Clark said yesterday in an interview at Bloomberg’s headquarters in New York.

Under Clark, Toronto-Dominion has spent more than $25 billion on U.S. acquisitions since 2004, including an agreement in December to buy Chrysler Financial from Cerberus Capital Management LP for about $6.3 billion, Bloomberg reported.

Chrysler Financial will become a top 10 auto lender in the U.S. within three to four years, increasing its assets to about $20 billion to $30 billion, from $7.5 billion when the deal closes, Clark said. Chrysler is adding about 200 dealers a week to its network, and will finance loans for buyers of all car brands, he said.

“Chrysler will be positive, and I think the U.S. market is coming back,” said Clark, 63. “There is a new mood of optimism.”

Toronto-Dominion set a profit target of $1.6 billion a year from its U.S. businesses by 2013, and told investors in December that it may surpass that. Canada’s second-biggest bank had $1 billion in U.S. profit in the fiscal year that ended Oct. 31.

Chrysler Financial will add $100 million to the bank’s earnings by 2012, and it expects new loan originations of about $1 billion a month the following year. The Chrysler transaction is scheduled to close in the fiscal second quarter, pending regulatory approvals.

Managing Demand

“Our issue will be managing demand,” as the car industry recovers, said Clark. “People will give up their house but they won’t give up their car because if they give up their car they lose their job.”

Ally Financial Inc., the auto and home lender majority- owned by U.S. taxpayers, reported a fourth straight quarterly profit yesterday as the mortgage unit became profitable and car and truck financing gained.

“The risk of a car loan is higher than it would be in a secured loan of a different kind of lending, but the margin is also better,” said Robert Sedran, an analyst at CIBC World Markets in Toronto. “So I still think it’s an attractive business” for Toronto-Dominion.

The auto lending expansion will help Toronto-Dominion match its growing deposit base with more U.S. assets, narrowing an $80 billion gap between the two, Clark said.

Clark said the U.S. economy is starting to rebound, with increasing demand for mortgages, credit cards and corporate loans.

Sea Change

“The big sea change has been in the commercial market,” he said.

Convinced that there were limited opportunities to expand in Canada — where large domestic banks are blocked from merging with each other — Clark set his sights on the U.S. in 2004. The bank’s largest purchase was in March 2008, when it bought Cherry Hill, New Jersey-based Commerce Bancorp for about C$8.5 billion.

The bank operates in 16 states from Maine to Florida, where head of U.S. operations Bharat Masrani uses a strategy called “retail-tainment” to attract and retain clients. Stores, as they are called, feature coin-counting machines, drive-through teller lanes, free pens, lollipops and piggy banks, and water bowls and treats for dogs.

Clark, who plans to retire in 2013, said he won’t be “disappointed” if the bank doesn’t make any acquisitions in 2011. The bank will open about 30 to 50 U.S. branches this year and will look at “small” purchases in the Southeast, particularly Florida.

Acquisitions

The bank is targeting lenders with assets of as much as $20 billion.

“Right now, we’re in the $10 to $20 billion range,” Clark said in an interview with Bloomberg Television. “We don’t describe that as big relative to our overall balance sheet.”

Clark said the recent acquisitions in the U.S. give it “critical mass” to avoid the mistakes of other Canadian lenders that have been less aggressive with their U.S. expansion.

“You need to go big or stay home,” he said. “You don’t want to be stuck in this mid-sized space.”

WASHINGTON – The U.S. Treasury may not have fully vetted the settlement of its interest in Chrysler Financial last year and not gotten a strong enough return for taxpayers, a bailout watchdog said in a report issued on Thursday.

The Treasury settled its interest in the former financial arm of the automaker for a loss in May last year, Reuters reported.

Private equity firm Cerberus Capital Management then became the sole owner and agreed in December to sell the the financing business for $6.3 billion to Toronto Dominion Bank, raising eyebrows over Treasury’s handling of the settlement.

Treasury may have “left money on the table” in its dealings with Cerberus, said former Delaware Senator Ted Kaufman, who headed the bipartisan Congressional Oversight Panel’s final report on the auto sector.

“The rush to exit Chrysler Financial compounded by incomplete due diligence may have resulted in an unnecessarily subpar return for taxpayers, preventing Treasury from recouping more of its prior $1.6 billion loss,” said the report.

The deal illustrated a broader finding of the panel: that the Obama administration may be too enamored of the politically appealing scenario of quickly cutting its stake in the auto business rather than patiently managing taxpayer interests.

“Treasury’s efforts have in some cases lacked transparency and accountability,” said Kaufman on a conference call with reporters.

Treasury disputed the findings, saying it had hired an independent financial adviser to assist in valuing Chrysler Financial and to check for other potential buyers. It said its exit was done responsibly.

The oversight panel was appointed by Congress to review bailouts under the Troubled Asset Relief Program.

Kaufman stressed that his group understood the administration faced tough decisions in orchestrating the bankruptcy overhaul General Motors Co and Chrysler in 2009. The panel said the government’s intervention was ambitious and the companies now “appear to be on a promising course.”

However, Kaufman said taxpayers will likely lose billions on now-public GM and with Chrysler, now under the management control of Italy’s Fiat.

Treasury has recovered about half of the $50 billion extended to GM in return for nearly 61 percent of the restructured company, and about $2.2 billion of the $12 billion given to Chrysler in exchange for a 10 percent interest.

Bill Visnic, senior editor of Edmunds AutoObserver.com, said the auto bailout was an attempt to prevent harm to the economy and should not be viewed as an investment.

“It had to be done,” Visnic said. “Anything you get back is a bonus.”

Treasury assumed 40 percent of Chrysler Financial’s equity as part of a $3.5 billion pre-bankruptcy loan extended in January 2009 to the lending unit’s parent, Chrysler Holding, which was owned at the time by Cerberus.

Treasury settled for $1.9 billion — a loss of $1.6 billion on the loan — in May 2010, transferring the Chrysler Financial stake to Cerberus, which became the sole owner ahead of the deal with Toronto Dominion Bank.

The panel found that Treasury officials apparently conducted “limited valuation due diligence, focusing on the merits of the offer from Cerberus,” the report said.

Treasury, the panel said, expected that Chrysler Financial would be wound down, which would limit its value. But Chrysler Financial continued investment in its business before finding a strategic partner in TD Bank.

Treasury responded saying it does not “engage in market timing.” The recovery, it said, was significantly more than expected.

Ron Bloom, the administration’s pointman on auto restructuring, said in Detroit this week that the bailouts prevented widespread economic hardship. He also said the agency is moving responsibly to exit the business and that turnarounds at GM and Chrysler have “yielded concrete returns remarkably quickly.”

Chrysler Financial, under new ownership, will be looking to sign up dealers at the National Automobile Dealers Association convention in San Francisco in February to propel its new-vehicle financing business from next to nothing today to a goal of $1 billion per month by 2013.

To do that, Chrysler Financial will need about 5,000 dealers in the United States and Canada, the company said, implying it will look beyond Chrysler-brand dealers.

Chrysler Group has about 2,300 dealers in the United States. Because of holiday vacations, Chrysler couldn’t immediately provide a count for Canada, reported Automotive News.

Last week, Toronto’s TD Bank Group said it will buy the former captive finance company from Cerberus Capital Management for about $6.3 billion in cash.

Tom Gilman, 59, Chrysler Financial CEO, said the company wants to hit the ground running after largely sitting on the sidelines since April 30, 2009, when Chrysler Group filed for Chapter 11 reorganization.

As part of its bankruptcy restructuring, Chrysler switched its captive financing relationship to Ally Bank, the former GMAC.

Chrysler Financial never totally quit making loans, but wasn’t competitive in the absence of incentive money from Chrysler. The Chrysler Financial portfolio of existing loans and leases shrank rapidly, because old loans were paid off much faster than new loans were made.

TD Bank said last week that Chrysler Financial had a remaining portfolio of about $7.5 billion in loans and leases. About 10 percent of the total was originated in Canada. Gilman said that in the past, Chrysler Financial’s portfolio was as much as 10 times that large.

The bank said it expects Chrysler Financial’s loan portfolio to rise to more than $20 billion in three to four years. “This is a franchise that once had $75 billion in assets, so it’s got room to grow,” Gilman said.

Gilman said Chrysler Financial won’t have to start completely from scratch, because it has about 2,300 dealers already signed up for near-prime and subprime loans. He said about a quarter of those are Chrysler Group dealers.

Chrysler Financial, of suburban Detroit, has about 1,850 employees, even after cutting its head count by around half in the last two years. The lender also has servicing centers in Dallas and Jacksonville, Fla. Its Canadian operations are based in Mississauga, Ontario.

Gilman said Chrysler Financial plans to pitch its former dealer clients with Chrysler Group brands. “Dealers have long memories. They remember how we managed them before, how we related with them before,” he said. “Those relationships remain.”

TORONTO — TD Bank Group (TD) and Cerberus Capital Management today announced an agreement under which Chrysler Financial will be sold to TD for cash consideration of approximately $6.3 billion. The purchase is comprised of net assets of $5.9 billion and approximately $400 million in goodwill. TD does not intend to issue common equity in connection with this transaction, reported F&I and Showroom.

Under the terms of the agreement, TD Bank will take over Chrysler Financial in the United States and Canada, as well as the former captive finance company’s processes, technology and its existing portfolio of retail assets on both sides of the border. Following this transaction, the business — combined with TD’s current platforms in Canada and the United States — will be positioned as a top 5 bank-owned auto lender in North America.

“It’s the foundation we need in the U.S.,” TD Chief Executive Ed Clark said on a conference call. “We needed franchises to generate assets. And, this is an asset class that has held up well during the cycle. We can take this platform and grow it, and grow it a lot faster than we’re assuming.”

The acquisition will give TD, which has spent approximately $20 million over the last six years to build its U.S. Consumer bank, a platform for asset generation in the North American automotive lending market, enabling it to significantly grow its consumer loan portfolio. Earlier this year, TD bought Greenville, S.C.-based South Financial Group Inc. and three troubled Florida banks from the Federal Deposit Insurance Corp. to extend its footprint into the U.S. eastern seaboard from Maine to Florida. With this purchase of Chrysler Financial, TD now has more bank branches in the United States than in Canada.

In addition to the existing dealer relationships that TD has in Canada and in the U.S. marketplace, Chrysler Financial’s dealer clients provide the company with access to one million customers. TD expects that the business could generate a return on invested capital of approximately 20 percent in three to four years, once it is operating at a steady run rate for target originations.

With about 1,850 employees in Canada and in the United States, Chrysler Financial has more than 45 years of operating experience in the consumer and commercial auto financing market. It is one of the largest auto financing firms in North America. In the United States, the automotive finance industry is the second largest non-mortgage consumer asset class after credit cards. It comprises about $650 to $700 billion in outstanding receivables and $350 to $400 billion in annual originations on a normalized basis.

Offering a hint at what segment Chrysler Financial will target, officials with TD said the former captive will focus on the prime market.

“Joining forces with TD will benefit both our customers and our dealer network,” said Tom Gilman, CEO of Chrysler Financial. “Under Cerberus’s ownership, Chrysler Financial has preserved its technology platform, retained top talent and maintained key capabilities. This transaction positions us for future growth with the financial strength of TD, one of the soundest, best capitalized and best managed banks in the world.”

The acquisition is expected to close in the second quarter of TD’s fiscal 2011, pending regulatory approvals and satisfaction of other customary closing conditions. Following the completion of the transaction, Chrysler Financial will continue to operate as a North American business that will be overseen by Tom Gilman and headquartered in Toronto.

TD officials said they expect to rebrand Chrysler Financial under the TD brand by spring 2011.

“This transaction takes our auto finance business to a new level and gives us access to a North American platform, top talent and systems and technology capable of processing over 2 million credit applications per year. The Chrysler Financial management team and sales force have a proven track record and extensive industry experience and will complement our existing lending expertise.”