Mullaly Hearts The Finance Biz
There are only a few businesses that are tougher to compete in right now than the automotive game. Though airlines have to be on the list, a recent addition would be the world of finance. But even with credit markets frozen, lenders stuck holding worthless paper and weekly rounds of consolidation and nationalization, FoMoCo CEO Alan Mullaly thinks holding on to Ford’s financing arm makes sense. Ford Motor Credit has “been through a lot with the world slowing down, and they have restructured aggressively to focus especially on the Ford brand,” says Mulally. “And it’s been helped by us divesting the noncore brands.” And, says Mullaly, Ford Credit isn’t simply dragging its parent company down with it. “With the situation being what it is, it’s hard, but the dealers and the customers say they’re doing a great job during the hardest of times,” says Ford’s main man. Faster marketing initiatives and more leeway in setting lending criteria including leasing (now abandoned by many motor credit firms) are said to be some of the big advantages to keeping Ford Credit around. But surely there’s a downside, right? Of course, but you need to ask a “source close to Ford who asked not to be identified,” to get it. “There’s an advantage to full ownership, but not a big advantage because the issue is that nobody will loan us money,” admits the nameless blue oval boy. With Ford’s credit arm enjoying a B- rating from S&P, it’s in the same shape (roughly) as GMAC and better off than Chrysler Finance. Still, warns Peter Morici, a business professor at the University of Maryland, a wholly owned captive “is useful for moving cars out if you don’t abuse it.” In the car business, that’s one huge “if.”
Ttilley on Nov 03, 2008
I criticized Mulally for his unseemly personal money grubbing months after he took over and failed to show concrete results. So it's only fair...I think he's right on this point, and for confirmation I'd point to the series of articles on this site about the role of auto captive lenders in keeping dealerships in business, and the problems GMAC is currently having in that regard. While GM, Ford, and Chrysler could all stand to lose dealerships, they'd be better off losing the weakest and not the least fortunate (in terms of their short term financing timing). These captive lenders were formed during the Depression, for reasons that seem especially relevant today.
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