Jo Tacon talks to
Chris Talman of Mazda, who is helping dealers to reduce their
funding woes.
It is fair to say that the motor industry has had its fair share of
funding problems recently, with dealers especially hard-hit.
Stocking finance has become more and more difficult to source for
many dealers, as nervous commercial banks remove financing
facilities and cut funding lines, in response to the greater
perceived risk in the wider motor industry.
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It was in response to this difficult cash situation
for dealers that the manufacturer Mazda tasked Chris Talman with
setting up a ‘finance team’ which would help dealers make the most
of their available finance, cutting inefficiency and giving them
more breathing space.
Talman’s role involves working closely with Mazda
dealers as a financial troubleshooter, resolving immediate
problems, and looking to identify longer-term methods of improving
cashflows. Talman’s appointment follows closely after Mazda moved
away from their relationship with Ford Credit Europe.
“Mazda took the decision to set up the finance team
earlier this year,” Talman says. “There was a two-fold reasoning
behind the step – firstly, we had just engineered a refinancing of
the dealer network, moving to Santander as a captive financier.
Secondly, new car sales and used car values had fallen, meaning
that our dealer network has needed to manage cash effectively to
get through these difficult times.”
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By GlobalDataThe setting up of the finance team helps
to differentiate Mazda as a “franchise of choice”, Talman says.
In addition, he observes, the transition to
Santander as preferred banking partner for both retail and stocking
finance gives dealers the security of knowing that they have as a
funding provider “a bank which has weathered the credit crunch
better than most, and which still has an appetite to lend and
access to liquidity.”
While other stocking finance providers are
retrenching, he says, having a partnership with a bank with a
sector specialism that is eager to grow its market share is a
strong selling point.
“It’s a huge competitive advantage,” he claims.
Talman adds that Santander has good robust risk
management procedures, which has allowed it to remain active in
this market.
In-depth analysis
Talman describes his work with dealers as
“primarily offering an outsider’s perspective, a fresh pair of
eyes”. Too often, he says, dealership staff can be “so focused on
the detail of cash management that they do not see other issues,”
he explains.
Often, identifying a problem points to its solution
– for example, when a dealer has a weak credit control process.
“It’s really about identifying where the funding
pressure is coming from,” Talman notes. “Phase one of my assessment
will look at the ‘quick wins’ which are available in the area of
cash management, and identify the person within the team who is
best-placed to handle that particular area.”
Phase two, meanwhile, involves looking at ways of
improving processes and controls in order to safeguard and improve
long-term profitability.
“That might include the new vehicle sales process
as it pertains to lead management, the way in which the workshop is
managed, or upselling in the service department. Finance and
insurance penetration definitely comes under this heading, too,”
Talman explains.
Boosting F&I performance delivers a “double
win”, he says, for both the dealer and for Santander.
As an example of how the finance house-manufacturer
partnership can help, Talman describes how he helped one new-start
dealer reduce the cash pressure on the business. The dealer was
using a bank overdraft to fund the showroom’s used car stock.
“We conducted a cash management review and
highlighted that a dedicated used car funding line would be more
appropriate.”
Transparency is a key tool especially with
multi-franchise dealers. Talman explains how Mazda happily works
with other finance houses and dealer house banks, as required, as
not all dealers will choose to switch their commercial banking to
Santander.
“We take responsible actions to support each
business and we understand that no two dealers are the same,” he
adds.
A finance team assessment is free to the dealer in
question, and feedback has been “very positive”, Talman states.
There is no stigma attached to accepting support
and advice from the finance team: “Good dealers don’t need this
kind of help, but that’s not to say that bad dealers do – a dealer
may well be struggling because of factors outside his control, and
may just need a helping hand in partnership with his
manufacturer.
“Perhaps his stock funding headroom has been cut,
perhaps the management team has undergone a sudden change – the
majority of Mazda’s dealers don’t need this level of engagement,
but for the ones that do, it has proved to be very helpful,” Talman
explains.
For Talman, who has worked for Mazda for over three
years, having spent nine years before that in corporate finance
with Ford Credit Europe, there is no “exact science” to sorting out
a dealer’s cashflow woes – “it can take 15 minutes or 15
hours”.
With the motor retail market in its current state
of upheaval, it is a racing certainty that his expertise will be in
demand for some time yet.
