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Protective Talks Credit, F&I Products and GAP’s Improved Stance

February 2010, F&I and Showroom - WebXclusive

by Gregory Arroyo - Also by this author

The magazine goes one-on-one with Brent Griggs, president of Protective’s Asset Protection Division, to discuss a host of topics ― from the F&I product sales and the credit market, to the company’s recent purchase of Prizm. Find out why the company is feeling positive about the coming year.

F&I: There’s been a lot of debate as to whether we’re in a recovery or not. What are your thoughts?

Griggs: Most of the key indicators suggest the markets and overall U.S. economy are recovering. However, consumer spending remains weak. We expect modest growth in new-car sales during 2010 compared to the 10.4 million new cars sold in 2009.

F&I: Coming into the third quarter, there were signs that credit might be loosening up. But as we exited 2009, some of my sources said finance sources remained pessimistic about our recovery. Then, coming out of the annual dealer conference, there was talk that things were loosening up. What are you seeing?

Griggs: Early in the economic downturn, auto sales were significantly impacted by tight credit. Our dealer customers were actually seeing a fair amount of traffic, but only a fraction of those shopping were able to obtain financing. Today, we are seeing signs that lenders are relaxing their requirements, which is partially responsible for the slight upward trend we are seeing in new-car sales.

F&I: Looking at your third-quarter report, Protective, like many companies in our industry, benefited from the Cash for Clunkers program. I think you attributed the approximate $10 million quarter-to-quarter increase in sales to Cash for Clunkers. Can you talk about the program’s impact?

Griggs: It is estimated that an additional 690,000 cars were sold as a direct result of the Cash for Clunkers program. Despite some delays in implementation and reimbursement, I believe it was one of the most targeted and effective economic stimulus programs of 2009. It is true that our third-quarter sales were approximately $10 million higher than second quarter, which was primarily due to that program.

One thing to note is that December’s seasonally adjusted annual rate of sales (SAAR) was 11.25 million vehicles, the highest point of the year if you adjust for Cash for Clunkers. This is further evidence that some growth has returned to the market. Most economists expect 2010 new-car sales to average 11.5 million, although comments from Ford suggest they are even more bullish. Additionally, Ford, GM and Chrysler have all announced that they are beginning to rehire plant workers in the United States in anticipation of the need for production growth in 2010.

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