News - Ford
Ford Credit 'still writing paper'
Credit queue: Some car dealers and buyers are unable to finance vehicles.
Ford says its finance arm remains in the game as industry, feds debate credit crunch
14 November 2008
FORD says it remains committed to its financing subsidiary in Australia for the time being, despite heavy losses in the US and continued industry speculation Ford Credit will follow recent moves by fellow wholesale and retail automotive trade financiers GMAC and GE to withdraw from the local market on December 31.
“The good news is we haven’t stopped financing,” said Ford Australia president Marin Burela yesterday (November 13).
“We’re in the game, we’re still there. It is very tough, there’s no question about that. We’re feeling the same pressures that GE and GMAC have felt, but we’re still writing paper and we’re supporting our dealers.
“We’re obviously looking at this on a day by day, week by week basis but we are still here and we’re doing the right thing by our dealers,” said Mr Burela, who met with the metropolitan Ford dealer body in Melbourne last week.
Asked whether the wind-up in Australia of GMAC and GE Money - which together are believed to have financed the “floor plan” showroom vehicles at half of all new and used-car dealers in NSW and up to 40 per cent of Australia’s new-car retailers, potentially effecting an estimated 20,000 jobs - would result in Ford Credit expanding or sitting tight in Australia, Mr Burela said: “We’re very much sitting tight.
“I think what you need to do is provide before you can thrive. That’s probably the best way you can put it. I’m satisfied that we’ve taken the right steps to keep ourselves above water and I’ve got to tell you it’s very, very challenging, but at the same time we’ve not decided one way or the other.
“We’re just holding the line, working with our dealers and managing the business, and let’s just continue to focus on that and that’s exactly what I’ve said to them (Ford dealers),” he said.
Ford Credit is one of a number of brand-affiliated financing companies that operate in Australia but the exodus of GMAC and GE leaves just three major automotive financiers – and many smaller, non-metropolitan and/or heavily leveraged dealerships and other automotive businesses at risk of being unable to secure the finance to continue trading.
Its somewhat non-committal reassurance to Ford dealers comes in the same week federal prime minister Kevin Rudd said his government was “acutely aware” of the situation, and when industry minister Kim Carr said he expected developments to occur in the “very near future”.
“In my continued discussions with the Australian treasury and their continued discussions with the finance company sector in general on those dealing with the auto sector, we are acutely conscious of the challenges which lie there,” Mr Rudd said on Monday (November 10)
“Right now, the treasury is in continued discussions with many of those companies in terms of providing appropriate ways forward for the future. We know that auto finance is part of it and I am sure the government will have further to say in the future once our discussions are concluded with the finance company sector.”
Mr Carr said the credit squeeze affects small to mid-sized automotive manufacturing businesses as well as car dealers.
“It’s not just car purchases, it’s also about the provision of working capital for the small and medium-sized manufacturers because these finance companies have become increasingly important and the banks have rationed credit over the last year or so.
“The government is working with the industry to assess practical solutions to this problem and I’ve got no doubt that we’ll see developments on this front in the very near future,” he said.
It is believed the government and industry bodies including the Federal Chamber of Automotive Industries (FCAI), the Victorian Automotive Chamber of Commerce (VACC) and the Motor Trades Association of Australia (MTAA) are continuing to explore possibilities including legislation to extend the December 31 deadline set by GMAC and GE.
“We would like to see government become active is in relation to the deadlines imposed on the dealers,” said VACC executive director David Purchase.
“Those who have been advised their funding will cease have been given 60 days’ notice to find an alternative provider. This period of notice is too short and unreasonable.”
As revealed by GoAuto, the MTAA is in discussion with a major bank and, according to The Australian, the Rudd government has also asked Future Fund chairman David Murray to investigate the viability of an industry proposal to establish a “temporary lending pool” by the major banks to provide credit to car finance companies.
Fairfax reports that an industry proposal to levy a $10 surcharge on every car sold, raising about $9 million annually, would compensate the government for underwriting bank loans to car dealers.
“The government is certainly aware of the difficulties that finance companies, including automotive finance companies, have been facing this year as a result of the financial crisis,” said Senator Steven Conroy in response to a question in parliament on November 12.
“That is why treasury and regulators are examining, in consultation with the industry, the impact of the financial crisis on finance companies and will provide advice on what actions might be appropriate to support this sector of the economy.”
The federal opposition has criticised the government for not accounting for the automotive industry finance shortfall within its $6.2 billion car plan released on Monday (November 10).
Shadow industry minister Eric Abetz said the plan missed “the biggest crisis currently facing the car industry” – slowing demand following the government's luxury car tax and purchasers’ difficulty in obtaining finance because of the global credit crisis.
Dealer consulting bodies have advised their clients to shed stock as quickly as possible, but many credit customers have been offered as little as half the purchase price of some cars, which in a slowing car market has led to unprecedented discounting and large stockpiles of unsold vehicles.
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