Ford Credit Slowly Increases Subprime Financing
Ford Motor Credit is conservatively moving toward offering more subprime financing again. The company has prepared for the shift by adding employees to its risk management staff and improving decisioning technology.
Ford Motor Credit is conservatively moving toward offering more subprime financing again. The company has prepared for the shift by adding employees to its risk management staff and improving decisioning technology.
"We'll probably be careful," said Ford Credit Chairman Mike Bannister to Automotive News. "We'll sort of inch our way up until we get to a point where we think the risk is not one that is meaningful from a profitability perspective."
Ford pulled back from subprime a few years ago after suffering high losses as a result. According to Automotive News, the losses peaked in 2002 at $2.36 billion, partly because of then-Ford Credit Chairman Don Winkler's rapid growth plan. Winkler sought to increase receivables through more high-risk loans, used car loans and non-Ford loans.
His plan failed, and in 2001 the credit arm lost $297 million in the fourth quarter. Winkler left the company in December 2001, and management shrank back to lower-risk loans. It reduced its highest-risk loans from 1.6 percent of total loans in 2001 to 0.5 percent in 2003.
Bannister did not say how much the company would grow its subprime business.
Ford dealer Rhett Ricart, CEO of Ricart Automotive in Columbus, Ohio, said customers' credit is not getting better and Ford's support with subprime will help dealers sell more cars.
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