Perhaps no division of DaimlerChrysler AG has as much opportunity for merger-related savings as DaimlerChrysler Financial Services (debis) AG.
DaimlerChrysler Financial Ser-vices (debis) North America, the division that handles financing for the United States, Canada and Mexico, recently reorganized to begin capturing those savings. Part of that reorganization is a consolidation of the home offices for Mercedes-Benz Credit and Chrysler Financial in a new building in Auburn Hills, Mich. (See related story on Page 23i.)
Mercedes-Benz Credit and Chrysler Financial, the two finance brands within the company, both report to Tom McAlear, who was named COO in January. McAlear reports to Darrell Davis, CEO of DaimlerChrysler Financial Services (debis) North America. Davis reports to Klaus Mangold, CEO of debis AG at its headquarters in Berlin.
McAlear spoke at his Southfield, Mich., office March 14 with Staff Reporter Michael Woodyard about the reorganization, the merged company's future and what each side of the organization brings to the party.
How is the upper management of your company structured?
As we put the new organization together January 1st, we took operational vice presidents, and in addition to their operational responsibility, we assigned brand responsibility. We now have a vice president/general manager for Mercedes-Benz who is Mr. Mercedes-Benz. He is responsible to work with Montvale (N.J., Mercedes-Benz USA Inc. headquarters). (There are) three vice presidents/(general managers) on the Chrysler Financial side. One of them is now the Dodge brand manager, one is the Chrysler-Jeep brand manager and the other brand manager handles minority dealers and megadealer groups.
How do you accomplish your goal of bringing the financial company closer to the sales and marketing company in Auburn Hills, Mich.?
(My vice presidents) are attending the staff meetings in Auburn Hills of the general marketing manager(s) for Chrysler-Jeep and for Dodge. So on a weekly basis, we are connecting with the brands at the manufacturer, so we know what the plans are. We're getting involved in the advertising, the promotional, the incentives, so that we can have a closer tie. Our 25 zone managers for the Chrysler group are going to San Diego with the 25 sales and service zone managers for the Chrysler group, and they're going to do a ride-and-drive on the (PT Cruiser) and have a meeting to explore opportunities to work better together.
Will bringing Mercedes and Chrysler under one roof muddy the two brands in consumers' minds?
We are going to keep, to our retailers, our dealers and our customers, a brand-specific presence. We'll do that through a separate field organization. For the Mercedes-Benz brands, it will be the three regions that currently exist, and for the Chrysler brands, it will be the 25 zones. The integration comes behind the scene. We will still go out as Mercedes-Benz Credit to the retailers and the consumers who drive the prestigious brand of Mercedes-Benz, and we will go out as Chrysler Financial to all of our Chrysler group customers and the Chrysler group dealers. For tax purposes, we're looking at how best to meld the legal entities, but we'll always have a Mercedes-Benz Credit, not to be mistaken with (the old) Mercedes-Benz Credit Corp. - it will be a brand within the merged company - and Chrysler Financial. Those brands will remain.
One of the main goals of the reorganization is to pick and choose strategies from each brand and apply them across the company. Where are you in that process?
We found some strengths on each side of the organization that are great. One is the (off-lease) remarketing of Mercedes-Benz; two is the service they give their customers and retailers. On the Chrysler Financial side, it's the ability to handle the volumes we handle with some of our system. The biggest synergy is remarketing. Mercedes-Benz has an excellent process. They're the benchmark in the industry. The volumes we'll have coming off on Chrysler vehicles are 10 or 11 times greater than our volumes on Mercedes-Benz, and we want to take and explode the Mercedes-Benz process into our entire organization.
Darrell Davis last year said Chrysler Financial was particularly good at the way it handles money. Will you use its methods throughout the whole company?
That has not progressed as far as the remarketing, only because of the migration of the systems and we were held up a little bit by all of the consternation over Y2K. Having put that behind us, now we're concentrating on migrating the systems that will allow us to do the electronic funds transfers.
So you need a common computer system to accomplish this? How soon will that be in place?
It is in the works, and it's our primary emphasis right now. The systems that each of us had were good in their own ways. But as we put the two organizations together, it's not one system or the other; we want the new and improved system that takes us into the future. Maybe that's changing from a mainframe to a Web-based system for part of it. We're studying that now. Moving the old Mercedes-Benz Credit Corp. systems headquarters and integrating that into Southfield (Mich.) is taking some time, and we're not as far along as we are on the remarketing.
You used to have a referral relationship with a subprime company called Summit Acceptance, but that was terminated a few months ago. When will you have a new subprime relationship?
Subprime is not one of our core competencies, but there is some opportunity in that marketplace. What we're looking at is ways to partner up, so that we can offer that potential to our dealer body. We have a couple of pilots going on right now that if they're successful, we'll roll them out nationally. The one that's the farthest along is one that we're piloting in Detroit mainly, but also in Boston, Atlanta, Kansas City. It's on a subprime, used-car leasing program. That's an area that is really not one of our strengths at all. So we're partnering up with a subprime company that's one of the best in the industry.
Will DaimlerChrysler Financial Services North America see strong revenue growth this year?
From an automotive financial perspective, that's a leading question, depending on how the industry grows. If the (seasonally adjusted sales rate) remains as strong as it is, we plan on growing considerably over our 1 million contracts (in 1999) on the Chrysler side and our record performance on the Mercedes side. We're looking at other opportunities, but our core business is to be marketing arms in support of the brands of the Chrysler group and Mercedes-Benz. Right now, we're doing upwards of 50 percent penetration of both of those brands.