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Driving Toward Recovery

November 2009, F&I and Showroom - Cover Story

by Gregory Arroyo - Also by this author

Who will be in the driver’s seat on the road to recovery? Dealers? Lenders? That was the main question filtering throughout the 2010 F&I Conference and Expo, a stark contrast to the mood heading into last year’s show when the collapse of Lehman Brothers, Fannie Mae and Freddie Mac signaled the start of what is now being called the Great Recession.

“A year ago, when I was in my room preparing for a panel discussion for this show, I was watching on television what was a marked day in the banking meltdown,” said Alex Sarafian, director of consumer credit for GMAC. “I never could’ve dreamt what that would mean for me as an employee of GMAC in the roller coaster that we were about to go on.”

A lot has happened since that time, from the disappearance of the asset-backed securities market to the scarcity of floorplan dollars. The industry also lost several key players, such as HSBC, Triad and Compass Bank, and saw credit-union market share surpass that of captives. And the incentive of choice in 2009: unemployment opt-out programs.

Joined by representatives from TransUnion, Experian Automotive, law firm Path Lewis LLP, Resource Automotive, and Smart Payment Plan, Pete Biscardi, president of NAC, reminded attendees that while the country has experienced 13 recessions, it has also experienced 13 recoveries.


Finance executives did offer some positives, but said the massive shift in auto finance this year has made it difficult for finance sources to predict loss. It’s one of the reasons why dealers can expect more deal verification, and why lenders will continue to monitor the performance of dealer loan portfolios.

Sarafian talked about GMAC jump-starting leasing for General Motors and Chrysler, and the company’s efforts to rebuild its dealer relationships. Chase Auto Finance’s Paul Rule talked about the rise of the company in the automotive segment — which sat in the No. 1 spot in Experian Automotive’s top 20 list of new-vehicle financing — noting how the company is now acting as the captive for Subaru, Land Rover, Jaguar and Mazda.

“It never gets as bad as it does in the housing or the credit card business,” he said. “We have suffered considerably in those products, yet we continue to make profits in our auto portfolio, not at hurdle rates, but it’s still a business we’re committed to.”

Executives made it clear they’ve moved from a sales focus to an operational focus, which has put serious pressure on dealer back-end profitability and maximizing reserve retention. The one positive, they said, is the industry no longer faces the liquidity issues seen in the first quarter.

Charles Aiesi talked about the flood of floorplan requests Honda Financial Services (HFS) has received and said the company is in a good capital position to respond. “We strategically were able to gain the capital that we needed,” he said. “In turn, we’re able to support many of the dealers’ requests on a must-need basis first.”

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