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Dealers getting by … so far
Only 60 dealers are still looking for floor-plan finance, but downturn may doom some
17 Mar 2009
By IAN PORTER
ONLY about 60 of the 400-plus dealers abandoned last year by their US-based financiers have still to get finance for their floor plans.
But industry insiders believe crunch time is only about a month away, both for dealers who lost their floor plan finance and for low-volume dealers hurt by the downturn.
The other dealers who were left high and dry by the withdrawal of GMAC and GE Money late last year have been picked up by various rival domestic financiers, including St George Bank and ANZ’s Esanda, according to Motor Traders’ Association (NSW) CEO James McCall.
Some industry sources have suggested that the twin problems of the global financial crisis and the sudden loss of financial backing late last year would cut a swathe through the ranks of Australian dealers.
However, so far there is no evidence that dealerships are being closed any more rapidly than usual, Mr McCall said.
“None have closed yet that I know of, although a few are on the brink,” he said.
He said he believed only a few of the 60 remaining unfunded dealers would be classified as unviable when they approached the Special Purpose Vehicle (SPV) set up by the federal government to fill the gap left by the departure of the American giants.
The SPV is being managed by Credit Suisse, which has appointed Liberty Finance as its agent.
“I wouldn’t (guess) as to how many will be left behind until Liberty and Credit Suisse have had a chance to look at these dealers and see who they are going to fund and who they are not,” Mr McCall said.
But he pointed out that the SPV was not a charity. It was planning to charge dealers 300 basis points more than the 90 day bank bill rate.
Left: FCAI chief executive Andrew McKellar.
Federal Chamber of Automotive Industries chief executive Andrew McKellar applauded the quick action by both the Government and by the financing industry.
“The other financiers have all worked energetically to fill the gap in the market,” he said.
“That process has advanced more rapidly and smoothly than might have been anticipated when the situation first arose.
“Equally, GMAC and GE have been broadly responsible in the management of their withdrawal from the market and the managed walk-down of their lending portfolios.” Mr McKellar said the announcement of the SPV had served a useful purpose.
“It was an important circuit breaker and I think it helped to give momentum to some of the activities of the other financiers who have stepped in to fill the gap,” he said.
Victorian Automobile Chamber of Commerce (VACC) general manager of VACC marketing and communications Tim O’Brien said there were no overt signs of distress among Victorian dealers.
“While many dealers are feeling the pinch, there haven’t been the collapses that many were expecting,” he said.
“While sales are down, they are still at the levels of 2004-2005, and dealers were making money back then.” However, Mr O’Brien conceded they might not be enjoying the same margins.
He said the prompt action of the federal government to put the SPV in place as a backstop for dealers looking for finance had put a floor under the whole industry.
“All the financiers were waiting for the government to underpin things and give the industry more security.” That appears to have worked well, he said, with many of the dealers affected by the withdrawal of the American financiers GMAC and GE Money now having been picked up by other financiers.
In addition, dealers and manufacturers had been working hard to reduce inventory.
“Most dealers have managed down their stock levels reasonably well,” Mr O’Brien said. “That’s where the big danger lay.” He said he had heard that some manufacturers had acted to ease the stock burden on dealers by holding stock on their own books.
“At one stage, dealers had trucks arriving at their dealerships with vehicles ordered three or five months before, when demand was running a lot stronger.” The decision by importers to hold back stock and production cuts at the local factories had helped to bring inventory closer into line with demand, he said.
But Mr O’Brien said no one really knew how many dealers were suffering, or how badly, because that was not the sort of information dealers wanted to get out to the public.
“No dealer wants the public worrying about whether the dealer will be there to service their car in future,” he said.
Queensland Motor Trades Association spokesman Richard Payne said the MTA was working hard to keep dealers focused on the facts so they didn’t become despondent.
“There is a lot of very aggressive marketing out there, both by dealers and manufacturers, designed to stimulate the market. The big factor is just a lack of confidence,” Mr Payne said.
“If you’ve got a job – and I know that’s where the confidence or lack of it comes in – your disposable income has not been this good for a long time.
“We’ve had tax cuts and there are more coming, petrol costs have subsided and interest rate cuts have reduced mortgage repayments. It’s just this lack of confidence,” he said.
Mr Payne said he was not aware of a Queensland dealer getting into trouble since the Pacific Toyota operation in Cairns went into receivership in December.
Pacific Toyota was the sponsor and majority owner of the Cairns Taipans, and withdrawal of the sponsorship in early December prompted the Taipans to go into receivership.
However, Pacific Toyota did not succumb to pressures caused by the market downturn or by the exit of the two big American finance houses, GMAC or GE Money. The receiver, Peter Hedge said the failure was caused by problems elsewhere in the businesses of Pacific Toyota’s owner, John O’Brien.
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