Ford Motor Co.'s trip down the aisle with Volvo Car Corp. forces another, lopsided corporate marriage - the union of Ford Motor Credit Co. and Volvo Finance North America Inc.
The joining of the two captive auto financing arms is hardly a marriage of equals. Ford Credit, in Dearborn, Mich., is the biggest captive in the world; Volvo Finance, in Montvale, N.J., is one of the smallest.
The two companies have barely begun to sort out how they will work together or what consolidation might occur. But several expectations have emerged.
For example, Volvo dealers anticipate more aggressive vehicle-lease prices, because Ford Credit's financial clout is expected to yield cheaper money for Volvo. Volvo may now be able to offer heftier lease subsidies or longer-running programs, dealers suggest.
Ford's vow to protect and nurture the Volvo brand in North America also is expected to extend to brand-name financing. Ford's past actions suggest it will retain Volvo brand-name financing to strengthen brand image.
For example, through its Primus Automotive Financial Services subsidiary in Franklin, Tenn., Ford Credit offers private-label financing to Jaguar and Mazda dealers in the United States and Canada. Jaguar retailers and customers who finance through Ford Credit do business with Jaguar Credit Corp., reinforcing the Jaguar brand name through the financial transaction.
But unlike Jaguar, Volvo has a big (by Volvo standards), well established captive finance company, which is relatively independent of Volvo Cars of North America Inc., the auto sales and marketing arm based in nearby Rockleigh, N.J. So integrating Volvo Finance into the Ford Credit system will be trickier.
It's premature to predict how Volvo Finance will operate within Ford, says Jim Ryan, CEO of Volvo Finance North America.
'The biggest issue right now is transferring the treasury function,' Ryan says. 'We're just starting to get calls from Ford on high-level issues like that.'
On Jan. 27, Ford said it would acquire Volvo Cars for $6.45 billion. AB Volvo shareholders approved the purchase March 8. Regulatory approvals are pending.
'We are still in the approval stages, but we have started to look at coordination and possible next steps,' says Della DiPietro, Ford Credit spokeswoman.
Volvo Finance is now expected to have access to cheaper money given Ford Credit's size, standing and borrowing clout. That could translate into better deals on the showroom floor.
'If there is an opportunity to leverage our business due to cheaper funds or cheaper costs, we will be able to pass that on to our customers,' Ryan says.
That will be good news to Volvo dealers who must compete in the high end of the market, where competitive lease deals are critical.
'One of the problems Volvo has had is that they haven't had the funds. Volvo is always on the short end of the stick on a lease-to-lease basis against its competitors,' says Art Spinella, general manager of CNW Marketing/Research in Bandon, Ore. 'Volvo will now have access to a lot more money.'
Massachusetts dealer Ray Ciccolo, president of Boston Volvo Village, says financing arms now play a major role in vehicle marketing because of the popularity of subsidized leases. 'This will be a real plus. We may be able to do a lease program more cheaply, which will bring the rates down and help us market more cars. We may also be able to offer longer running programs so the deals don't expire as quickly.'
Similar reductions might be available in floorplanning, capital loans or mortgages, Ciccolo says.
Ford Credit is charting new territory with Volvo Finance.
Ford owns Jaguar and has a controlling interest in Mazda. The company provides automotive financing to both brands through Ford Credit's Primus subsidiary, not separate captives. Primus offers automotive financing to non-Ford and Lincoln Mercury dealers.
The use of the Jaguar Credit Corp. private label is part of Ford's brand strategy, and may provide a clue to how it will approach Volvo.
'There is a benefit to dealers and customers with a private label that is fully authorized by the manufacturer,' says Primus spokesman Jack Brown. 'We believe there is value added with dedicated financing. It adds to brand strength. When a customer writes a check every month to Jaguar, that reinforces the relationship.'
Moreover, Primus has staff dedicated to working on private-label relationships and brand management, Brown says. Primus, which has over $14 billion in receivables, provides private labels for Jaguar, Mazda, Subaru and Suzuki in the United States and Canada.
Volvo Finance also has tackled its own brand mission, Ryan says.
'Our focus for the last three years has been quality and adding value to the relationship,' Ryan says. 'Our goal is retention - returning customers back to the dealer. We have worked with the dealers and the manufacturers on developing creative programs to return the customer to Volvo. Our good CSI has helped us do that.'
Volvo Finance earned the J.D. Power and Associates top ranking for initial lease satisfaction in 1996, 1997 and 1998, Ryan says.
Indeed, Volvo Finance's customer handling could earn it greater standing within Ford, suggests analyst Spinella.
'Volvo is very good at handling its very persnickety customers. They have a professional way of dealing with people who expect an enormous amount of hand-holding,' Spinella says. 'It gives Ford the option of having a high-end/luxury-market finance group.'
Volvo Group is still based in Gothenburg, Sweden. Its remaining business lines are heavy trucks, buses, construction equipment, marine and industrial engines, and aerospace. It does not have to unscramble its heavy-truck financing business as a result of Ford purchasing Volvo Car Corp. Volvo Commercial Finance is a separate entity that handles heavy-truck and construction equipment financing.
'We are looking at finance to be an important contributor to profits for the group,' said Volvo Group CEO Leif Johansson, in an interview in New York March 4, shortly before Volvo shareholders approved the Ford purchase.
It is too early to predict the savings at Volvo that might result from the tie with Ford, although Ryan expects opportunities to lower costs.
The company already operates leanly, Ryan says. 'Our expense to served asset is less than 1 percent.'
Mary Connelly is a Detroit-area Automotive News staff reporter.