When John Devine retired from Ford Motor Co. in October 1999 at age 53, he didn't head for a Florida retirement village or go fishing. The 32-year Ford veteran and former CFO moved to San Francisco and became CEO of Fluid Ventures LLC.
Former rival General Motors found Devine there last year and recruited him to become its CFO and a vice chairman. He assumed those posts Jan. 1.
Devine spoke with Staff Reporter Jim Henry at the Geneva auto show Feb. 27.
Lenders say they can't compete with captives because of the financial support captives get from the factories. Does the net income of the captives really reflect how profitable the auto-lending business is, or is it just a question of which pocket the money comes from?
Reported net income is a pretty good indicator of where they think they are. What you don't want to do is to kid yourself about the inherent profitability of that business. Sure, there is incremental support, but things like credit losses are the captives' responsibility.
Is there some way to gauge how the captives would do as stand-alone businesses?
GMAC is a stand-alone.
Are stand-alones profitable?
GMAC is profitable; Ford Credit is profitable. I think it's a good business to be in. There is residual risk; there is credit risk.
What's the 2001 outlook for the captives?
The goal for GMAC is the seventh year of increasing profitability. That's not an easy goal in a year when volume is supposed to be down.
How do you get more profitable when volume is down? Cut back on leasing?
No, leasing is about right where it is.
Do you expect the Federal Reserve to make more interest-rate cuts?
I hope so. I think we're going to see another one or two reductions this year. Consumer confidence is down. The Fed looks at us in the auto industry as an indicator of how things are going for the economy. January, by any stretch, was a pretty healthy level. February looks pretty good.
So why is there so much gloom and doom about the economy?
We don't think we're in a recession. But when sales are down at all, any time there is a shock or something like that that we can't predict, you are not that far from a full-blown recession.
What's your 2001 sales forecast?
It's about 16 million to 161/2 million, including medium and heavy trucks, and the February rate looks to be in that range. That's still pretty good. The scenario late last year was that the first quarter would be very weak, with a gradual recovery the rest of the year. The first quarter is turning out not to be so bad. In light of that, the issue now is what the second half of the year looks like. Will we see recovery? Right now, flat seems more likely.