Ford Credit Australia’s ham-fisted strategy behind its announcement that it is to exit consumer retail finance here, is put into clear perspective by news today from the US.
There, the US Treasury has announced that it will loan US Chrysler’s finance arm USD$1.5 billion to finance loans for consumers who want to buy cars from Chrysler dealers.
The reason: to improve Chrysler’s ability to lend to prospective buyers. You see – and it’s not rocket science – it is easier to sell cars if you can finance buyers into them. And Chrysler US, dragging itself along on the bones of its arse, needs to sell more cars if it is to avoid catastrophe.
Then what, you might ask, is behind Ford Credit Australia’s announcement that it is shutting up shop on consumer finance, while retaining its provision of wholesale finance (floorplan) to car dealers?
And if it is easier to sell cars if you can finance buyers into them, why is Ford Credit Australia taking a course of action that is going to make it harder for Ford dealers to sell Ford cars?
Is Ford Australia selling too damn many cars here?
No. This action by Ford Credit Australia is to put pressure on Ford dealers to secure alternative floorplan financiers (because car dealers normally provide retail finance to customers through their floorplan financier).
Simply put, it is Ford Credit’s way of pulling up stumps. In pulling out of retail finance, it has pulled out middle stump on its dealers.
As we said in a previous article on this matter: this action by Ford Credit is part of a two-part strategy, albeit a ham-fisted one, to exit the market in both retail and – later - wholesale finance. It makes no sense otherwise.
The assurances both Ford US and Ford Credit Australia gave Treasurer Swan in December last year that it had no plans to exit, now appear perfectly hollow.
It is time Ford Credit ‘came clean’ and made its full intentions clear. Ford dealers deserve better; so too do Ford Australia’s class-leading cars – the brilliant FG Falcon and Territory.
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Well you are wrong ..Ford Credit is not pulling out of floor plan credit for dealers. They are simply not being a credit company for private car buyers. This is no big deal as only 10% of retail car sales are financed by Ford Credit., and this is not only Ford dealers but Mazda and Volvo as well. So as you see its not really a big deal as there are many finance companies around to step in. The floor plan financing for dealers remains the same, unlike GM money and GMAC who closed down.
Yo Rick, you reckon? (Have you chatted to a Ford Credit business customer on this “no big deal” matter… like a Ford dealer, or Mazda or Land Rover dealer? Maybe I heard from the wrong ones…)
Agree that GE and GMAC situations are different, but the motivations are the same - US parents under pressure, trying to shore-up operations ‘at home’ and looking into every corner to cut risk exposure - and the eventual outcome is also likely to follow the same path.
But I hope you’re right cobber.
The Insider
I heard that 10% line spun by the Ford Credit PR machine too. Of what? Retail includes a lot of things, passenger, commercials, fleet, tractors?
You have to ask yourself why they would want to continue offering just wholesale funding. Mostly dealers are on volume plans…the more retail the less the wholesale. That’s gone isn’t it? Will they offer dealers a commercial rate or a concession? What do you think?
Here’s a guess. Wholesale pricing will be fair but ‘firm’.
They’ll wait till dealers start to drift off with better deals, announce their services are no longer needed then shut the doors.
Want a bet?
Gee aren’t we all financial Guru’s here??? Aren’t we just super smart Business people???
T.I & Jasper, would you prefer that Ford Credit do exactly the same as GMAC & GE Auto and just lock stock & barrel pull out and let the dealers struggle to find a floorplan provider in a market that would look at the balance sheets of most dealerships and laugh? Sure they may well be looking at pulling out down the track but at least they are giving the dealers time to find alteratives. Financiers will offer dealers floor plan deals if they can see that dealer is giving them value. Then to ie them into their product the finaciers offer a good discount rate on F/P.
JAsper when the talk about retail finance they talk about the finance the sell to customers. Wholesale is the F/P and other institution money.
To accuse it of being ham fisted is either a pretty lame understanding of the business, or just bloody arrogant.
Reminds me of the old joke; how do you get a small Ford dealership? Answer, buy a big one and wait….
What the heck do you expect Frontman? Sympathy for the big blue oval and it’s credit arm? Give me a break. Like the other American good time fella’s, this mob will cut and run. Bad luck staff. Bad luck customers.
How about reserving your concern for the thousands of ‘retail’ Aussie finance consumers left behind in the wake of these U.S. megaflops.
Let’s see what customer service levels they experience in 2009. Then you can ask for my understanding.
If you read the article you’ll learn that Ford Credit are doing much the same as GE Money et al, they are just doing it by stealth. They are forcing the hands of the dealers who have used their F/P and retail credit lines as one doesn’t work well without the other.
FC will come out and claim that their wholesale credit arm will have to close because as it is no longer viable. Its just a matter of time. Sometime this year would be my guess. It will blame it on a lack of demand for its wholesale product, a lack of demand that it has brought upon itself…on purpose.
From reading Jasper’s comment I would say that he has a good grasp of retail and wholesale as it relates to this article and an excellent grasp of what Ford Credit are actually up to. Unclouded by the obvious and I must say rather pathetic Ford bias that comes through in your comments Frontman.
I don’t think anyone is claiming to be a Financial Guru, but at least someone on the internet is prepared to look through the smoke and mirrors and attempt to reveal the true story.
Willow & Jasper, you will notice I did not say that they weren’t pulling out. I mean from the coal face, they aren’t writting that much in retail finance anyway and the largest majority of dealers that have been using their reatail arm have had a second string financier that has been getting the bulk of the finance anyways because Ford credit haven’t been competitive enough. (Most banks could write cheaper than FC). My comment was obviously missed by the two of you in the fact that I believe it is far better to force the dealer to source another retail lender first (so that they can still sell finance) and then use that as a tool to get the right Floorplan deal. Instead of the GMAC / GE way of saying “hey we ain’t going to be here in a months time! To bad! So sad!”
For the record, Ford credit has been winding down it’s opperations for over 4 years now, GMAC actually started winding back in 2002 when they moved out of regional offices and centralised in Newcastle, so if there has been any smoke and mirrors then they have been very inefective.