Ford Motor Credit Co., the world's largest auto finance company, is scrapping its old bricks-and-mortar regional structure.
Under Terry Chenault, executive vice president for global operations and technology, Ford Credit has uprooted loan-servicing functions such as collections, accounting and loan processing from 141 branch offices and merged them into eight large, highly automated service centers. Seven are in the United States and one is in Canada.
Two are open for business and the rest are to be completed by year end. The U.S. branch offices still exist but only for sales and marketing functions. Some of the smallest branches may become 'virtual' offices, with local representatives working out of their homes.
Chenault has similar plans to centralize Ford Credit in Europe.
Chenault, who turned 45 this month, joined Ford Credit in January 1999 after a 20-year career at American Express. The credit card business is a hard taskmaster in terms of automation, efficiency, big volumes, the impact of the Internet and the importance of customer satisfaction. Chenault said he is applying some of the lessons he learned at American Express to Ford Credit.
On another front, parent Ford Motor Co. has not said what it will do to sort out the captive finance side now that it has formed the Premier Automotive Group out of Volvo, Jaguar, Aston Martin and Lincoln Mercury. Volvo Cars has its own U.S. captive finance company. Primus Automotive Financial Services handles Jaguar and several non-Ford brands, but not Volvo. Lincoln Mercury 'belongs' to Ford Credit.
But Chenault says that behind the scenes, the new servicing centers will be able to handle accounts for every brand in the inventory, although subprime business will continue to be handled separately. Chenault spoke with New York-based Staff Reporter Jim Henry in early March. Edited excerpts of their conversation follow.
How are the new service centers coming? Have you announced all the locations?
I'd say it's going well. Two centers are already open, Nashville and Baltimore, and another three are in solid launch mode. We are seeing some good results for the first two that have already opened. Next up is Tampa, (Fla.) at the end of this month. (The others are in Colorado Springs, Colo.; Arlington, Texas; Henderson, Nev.; Greenville, S.C.; and Edmonton, Alberta.)
Why are you doing all this?
For 40 years, Ford Credit has had a terrific business model that made it the No. 1 automotive finance company. People ask, 'What are you doing, tinkering with something like that?' I would say we're trying to move ourselves to an even higher level of customer service. Operations and sales are undergoing a transformation. Sales and marketing and the operations culture were all combined. We're starting to specialize those positions.
What's your total investment in restructuring?
That's not something we disclose. You've seen our profit go up dramatically, and we intend to hit our profit target for 2000, despite doing all this. (Ford Credit net income was up 16 percent in 1999, to $1.3 billion, and its stated goal for 2000 is to increase earnings another 10 percent.)
Does centralizing operations mean you've also centralized decision making?
No. The branches have their own profit and loss statement. They will manage relationships with the dealer. We are committed to having that local presence.
Are the branches still around, or is everybody working out of their homes?
There are some of those. But the branches are brick and mortar. There are some tests going on, as to what exactly we need. The average branch is now 50 or 60 folks. The service centers range from 250 to our biggest, which is around 1,500 in Nashville, which also includes Primus people. The branches are there to support the dealer, and we will not mess with that.
Lots of layoffs? Is that one of the ways you're getting more efficient, especially if you're automating?
This is not about job reductions. We believe there will be some scale advantages. There are technology pieces you just can't do at a branch because the volume isn't there - like auto dialers or voice response systems, which allow customers to do better self-service, if that's what they want to do. Or imaging technology that allows you to take an image of a contract, and move it around in the organization on a computer screen, instead of a physical copy. That has come down in price so much that you can make an image of a document for fractions of a cent, and use it across the organization.
I suppose you won't know a final number until you know how many people are willing to relocate.
There are about 6,500 branch employees in North America, and about 4,300 positions were impacted. We're offering all of them a job in a service center, with a relocation package. We are getting a lot of takers on that, virtually 100 percent of the management teams. Almost 50 percent of the rest of the work force took the relocation package in the Tampa service center, which we consider a pretty good success.
You have global responsibility, right? Are you doing this around the world?
In Europe, at St. Alban's in the United Kingdom, we are in the process there of in-country centralization. We brought in the Scotland branch. On the Continent, on the pan-European model, we are still doing design work. That hasn't been finalized yet.
How much of the change is driven by technology?
What's driving it is the change in the business model. We waited until the technology is right before adopting it. Marketing and sales functions are happening out in local areas with the dealers. Technology is the enabler of change in this business model. It gives us a platform for growth in the future.
It's really about speed and quality. You have to have both. Even on the outbound (phone) dialer. When you're calling somebody who hasn't paid their bill, it's much better for everyone concerned if you can notify them before they have delinquency charges.
Do some of these lessons come from your experience at Amex?
Absolutely. Most of the financial service industry has been way ahead of the auto industry on the technology front. But what we learned at American Express is you didn't have to be on what's called 'the bleeding edge,' as opposed to the leading edge, of these technologies. I was at American Express for 20 years and I've seen all the technologies - some of them wildly successful, some not. We've been able to avoid a lot of those pitfalls. We're adopting second-generation versions of those technologies, maybe even third.