DETROIT — Chrysler's finance arm has agreed to buy the common stock of E. F. Hutton Credit Corp. for $125 million.
The purchase from E. F. Hutton Group would be the second recent move to diversify by Chrysler Financial Corp.
In mid-May, Chrysler announced a joint venture between Chrysler Financial and General Electric Credit Corp. to make equity investments in machinery, equipment and real estate.
"The purchase of E. F. Hutton Credit will make Chrysler Financial a more independent company, with broadly based financing capabilities," Chrysler Chairman Lee A. Iacocca said Friday in a news release.
"CFC (Chrysler Financial Corp.) is going to make greater financial contributions to Chrysler, and that's going to make us stronger in our basic business--the automotive industry," Iacocca said, adding that the acquisition "fits our long-range corporate strategy."
Chrysler Financial is a wholly owned Chrysler subsidiary primarily involved in dealer financing for the auto maker's cars and trucks. It recorded 1984 earnings of $83.1 million and earned a record $31.8 million in the first quarter of 1985, the statement said.
E. F. Hutton Credit, based in Greenwich, Conn., is a diversified equipment-finance company involved in commercial lending and leasing. It had gross finance receivables and operating leases of $1 billion as of March 31, with 28 offices around the country, the statement said.
Hutton purchased the credit company from International Paper Co. in 1981, and its portfolio has doubled in size since then, according to Robert Fomon, chairman and chief executive of E. F. Hutton Group.
"We came to the conclusion to sell the company because the growth of Hutton Credit far exceeded our expectations and we are not able to fully utilize its attendant tax benefits," Fomon said.
"We feel that Chrysler has the ability and the desire to further advance the expansion of E. F. Hutton Credit," he said.
A sale agreement must still be completed, and the transaction is subject to approval by the boards of both companies and federal regulators, the statement said.