When credit crisis hit, Ford captive provided stability

DETROIT -- Skip Davenport and Dennis Nesselhauf, two dealers on opposite ends of the country, know firsthand what the continued survival of Ford Motor Credit Co. as a captive finance company means.

Davenport, the third generation of his family running D&D Motors in Greer, S.C., praises Ford Credit for continuing to lend to dealers and car buyers even as credit markets seized and the U.S. economy went into free fall in 2008.

That wasn't the case at Ford's domestic rivals. As the recession deepened, GMAC Financial Services and Chrysler Financial pulled back. General Motors, no longer majority owner of GMAC, even began advertising a retail financing promotion with credit unions.

Despite the stability of Ford Credit's relationship with parent Ford Motor Co., it wasn't business as usual for the Blue Oval.

Even as Ford Credit eliminated 20 percent of its U.S. work force, the finance company increased floorplanning with Ford-Lincoln-Mercury dealerships and started advertising directly to car shoppers.

For dealers, many of whom were struggling, more help came in the form of dealership reviews offered by Ford Credit. In March, the lender established a dedicated position to handle such reviews, increasing the number of checkups. In some cases, Ford Credit tried to match dealers with another lender if it couldn't fulfill a loan request.

Davenport's D&D Motors accepted the offer to review its balance sheet. As a result of Ford Credit's recommendations, the dealership tightened bookkeeping and put additional operating capital into the store.

"The stability that Ford Credit has provided us through this turn has been huge," Davenport said. "It's so important for the manufacturer to have a captive finance arm."

At his Southern California dealership, in a recession-wracked farming community just north of the U.S.-Mexico border, Nesselhauf has much the same appreciation for Ford Credit. He also took advantage of the offer of a free balance sheet review and made changes that he said have helped his operation at El Centro Motors.

"I'm really happy they came in," said Nesselhauf, adding that such a review otherwise would have cost up to $40,000 in consulting fees. "It's a heck of a deal for Ford to be doing."

On the other hand, because Ford Credit pulled back on wholesale lending to non-Ford franchises, El Centro also is stuck without a floorplan lender for its Kia franchise.

But with banks fleeing the wholesale business, Nesselhauf hasn't found a new floorplan source. In August, the dealership began financing its small Kia inventory itself.

"Ford Credit is trying to put their assets into Ford dealers, not other manufacturers -- I understand why they're doing it," said Nesselhauf, a former pre-med student who got into the car business after learning his uncle made $58,000 as a sales manager at a St. Louis Pontiac dealership in 1973.

Ford Credit's wholesale market share with Ford-Lincoln-Mercury dealerships is now at 80 percent, up from 77 percent a year ago, said John Noone, the captive's president of global marketing and sales.

Ford Credit picked up the extra share as it shifted resources to Ford Motor's domestic brands and as banks spurned wholesale financing.

"There should be no Ford-Lincoln-Mercury dealer that fails to have adequate access to wholesale funding, assuming they have a viable entity," Ford Credit CEO Mike Bannister told analysts in September. "With respect to the retail business, we've had no complaints from any of the Ford-Lincoln-Mercury dealers about not being able to find financing for their customers."

With car buyers worried about credit, Ford marketers struck as domestic rivals faltered.

"We were very aggressive because others couldn't say what we could say," said Jim Farley, Ford Motor's group vice president of global marketing and Canada, Mexico and South America operations. "They didn't have a captive that was fully functional, but we did."

The result? Advertising slogans such as "Because when America needs it most, you can count on Ford Credit financing." Current advertising says, "Ford Credit is here to help with your financing needs."

Ford Credit's online traffic and online credit applications rose significantly after the advertising began, Noone said. The advertising message likely will continue, he said.

"The key advantages of a captive have really borne through," Noone said. "That has had some contribution to the success we've seen in 2009."

Ford Credit's retail financing share hasn't spiked, but Ford Motor's share of vehicle sales has risen. Noone and dealers say the lender's stability drove new customers to Ford dealerships -- especially after GMAC announced last fall that it would restrict retail financing to customers with credit scores of 700 or higher.

"I know we got people in here that had never been a Ford customer at all," said Dallas Hixson, a partner with Hixson Automotive Group, a dealership group in Alexandria, La. "Ford Credit did buy their deal, and they're riding around in a Ford vehicle now."

Those buyers are now more likely to stay with Ford, Farley said.

"Anybody who is more likely to rebuy my product, I have lower costs if I'm smart about dealing with them," Farley said. "So over time, that is the value of the credit company."