The newly-appointed CEO of the Retail Motor Industry Federation
(RMIF), Rob Foulston, has joined at a challenging time for the
federation’s members. His background, including a stint at Deutsche
Bank dealing with the distressed debt business, ought to stand him
in good stead as he prepares to take the federation in some new and
interesting directions.
Foulston had hardly settled into his new job before
the RMIF announced a rather startling piece of news: its intention
to set up a ‘dealer bank’, a finance resource to which retailers’
customers could apply for finance for a new or used car.
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“Setting up a trade bank just seems like a natural
step for the RMIF to take,” Foulston said. “It’s a great way to
support the industry, and our members.”
Not that consumer finance for car buyers is not
readily available, Foulston is quick to point out: “Our members
report that there is little problem arranging finance for all but
subprime customers.”
But the dealer bank would be “a strong statement of
support at a difficult time, and would help to shift consumer
perceptions of finance availability,” he added.
“Consumers are already nervous, with worries about
potential job losses at the forefront of their minds. The thought
of being turned down for finance, and damaging their credit score,
is another brake on consumers’ willingness to go into a dealership
and buy a car,” Foulston observed.
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The reaction to the announcement has been
“tremendous”, Foulston said, with several finance companies having
already approached the RMIF about a possible partnership.
At the moment it looks far likelier that the
federation will opt to operate its dealer bank in conjunction with
an existing bank or finance house, rather than going it alone,
which would be a difficult and costly exercise.
“It makes sense to work with a partner that already
has the distribution infrastructure in place,” Foulston said.
Another option under consideration is to set up a
funding panel, with the RMIF acting as an intermediary, although
Foulston admitted that this idea is only “on the drawing board” at
the moment.
Funding for the dealer bank would come from the
RMIF as well as from its partner. Foulston said that, if the
government accepts the need to help boost the supply of readily
available finance to fund car purchases, it might make sense to
partner with a state-backed bank – such as the Royal Bank of
Scotland.
“We’re not asking for a bailout,” Foulston
emphasised. “A financial handout is not what we’re after at all. We
would just appreciate some structural support to help us through
the current bad patch.”
Waiting for relief
For while dealer closures among the RMIF’s members
amount to no more than “about 100 outlets”, Foulston estimated, it
is clear that many retailers are hanging on by their
fingernails.
Foulston is too polite to admit to frustration with
the speed of the government response, but with the scrappage scheme
(see box) still under discussion, with no firm promise that it will
ever become official policy, the industry desperately needs a
boost.
The dealer bank – when and if it gets off the
ground – will help, not least because it could expand its remit to
include the provision of stocking finance for dealers facing
troubles in securing funding for their showroom models.
The idea of an ‘industry bank’ has a long and proud
pedigree in the UK.
“Look at the National Farmers’ Union, and the
financial support it provides through the NFU Mutual,” Foulston
said.
RMIF calls for scrappage
scheme
The director of the RMIF’s National Franchised
Dealers Association, Sue Robinson has not been slow to express her
opinion that the sooner the government introduces a scrappage
scheme to stimulate demand for new and used cars, the better.
“Consumers will look to new cars again, given the
right impetus, and the RMIF is continuing to lobby for the
introduction of a scrappage scheme that could help revive car sales
and remove high-polluting cars from the road at the same time. This
scheme is widely supported by car retailers,” she said.
Robinson has met Angela Eagle, exchequer secretary,
to discuss such a scheme, and the RMIF has presented a paper to the
government setting out the benefits of a scrappage incentive.
According to a poll conducted by the Automobile
Association, up to 28 percent of drivers surveyed would consider
changing their car, if a suitable financial incentive were
available.
With 4.3 million cars manufactured before 1996 in
the UK, making up 14 percent of the parc, there is a good chance
that a scrappage policy could take large numbers of older,
more-polluting cars off the roads.
The RMIF’s paper said that a scrappage policy
should apply to cars and light vans over eight years old, which
produce more than 150g/km CO2.
The incentive should be “worthwhile” and more than
the trade-in value of the vehicle, with £2,000 suggested as a
benchmark, a figure that “could be graduated depending on the age
of the car or light van”.
“The scheme should be self-funding though VAT
receipts received by HM Revenue & Customs (HMRC) on the sale of
the new cars,” the RMIF added, and should exist for a “meaningful”
period of time – at least a year.
“Our members estimate that a scrappage scheme could
generate sales of up to 250,000 cars and 30,000 light vans,” the
association said.
