GM Financial aims to stretch its floorplanning

General Motors Financial CEO Dan Berce said floorplanning, customer loyalty and protection plans are key areas of focus for the captive lender.

The lender's retail finance penetration of more than 50 percent is the highest since the second quarter of 2020, and Berce said he wants to keep that going.

On April 25, the automaker's finance arm posted lower year-over-year first-quarter earnings, down 39 percent to $584 million. Lower lease income, which the automaker said it expected, contributed to the decline.

After earnings were announced, Berce spoke with Staff Reporter Gail Kachadourian Howe about GM Financial's programs and goals for the second quarter. Here are edited excerpts.

On what percentage of U.S. GM dealers floorplan using GM Financial:

Currently, 43.6 percent have taken our floorplan we actively provide.

If GM Financial has any programs to increase that floorplan penetration:

Our goal is just simply to continue to increase our penetration. It's available to every GM dealer. So ideally, we'd have 100 percent. The program really involves a unique value proposition where first of all, they are floorplanning with the captive and so they're part of the whole GM ecosystem. But we also provide benefits for floorplanning with us versus non-floorplanning dealers, whether it's unique programs and rates or abatements.

Or they get to avail themselves of our dealer dividends program whereby if they provide us with a certain number of both new-car finance and used-car finance contracts, they get money back, if you will, for every incremental contract they provide us.

So even though our rate that we provide them outright for floorplanning may be in some cases higher than what they can get from the big banks ... the money from the dividends program they get really drives their debt rate from us below what they can get from a bank.

On how long GM Financial has offered these floorplan programs, and if changes are expected:

It's been in place for a while, back five years at least. We constantly tweak the program because the market changes and different elements of the program might be changed, but the basic framework is what we have had in place for some time.

If prime customers are still the majority of GM Financial's credit mix:

Yes, it keeps increasing. Our prime mix is now close to 74 percent and that's of the existing retail portfolio.

So we're clearly originating in the neighborhood of 80 percent prime, which is why that number keeps going up. So as new originations filter into the existing portfolio, the number is increased. And that's not necessarily by design.

As you may know, the subprime portion of the new-car market especially has declined in the last few years primarily because of affordability issues with the price of new vehicles up so much. A lot of new-car buyers' subprime demographic that otherwise might have bought a new car now can't afford it. So the percentage of subprime across the industry, new-car, is down.

On his three areas of focus in 2023:

First of all, we want to continue to increase our floorplan penetration and achieve a nice level of retail penetration. Our retail penetration for GM was a little over 50 percent in the first quarter, which is really the highest it's been since the second quarter of 2020 when we had some unique zero-for-84-month programs in the market. So we want to obviously continue to keep that retail penetration at a high level.

Second of all, we want to continue to improve the customer experience. For five years running [we have] had the highest finance company loyalty, meaning customers who buy a GM vehicle and finance through GM Financial have a much higher propensity to buy a GM vehicle again compared to any other OEM financing through their captive finance company.

So we have really high loyalty rates. We want to keep them high and part of that is just enhancing our customer experience; we've invested a lot in CX (customer experience) technology. We have a program in place called Cadillac Financial to provide a white-glove experience for Cadillac customers, and all that leads to high customer satisfaction scores, which leads to loyalty.

The third initiative we have in place is around our protection products. We assumed responsibility for all GM protection products. Most prominently — vehicle service contracts, GAP, wheel-and-tire — we assumed responsibility for that in 2021 and relaunched it early in '22.

So we're about a year into it. We did increase the dealer participation in our programs measurably since our relaunch and we think we've got a nice suite of products and good value proposition for the dealers that participate. I talked about dealer dividends, which helps our floorplan penetration.

Dealers that use our protection products also can get dividends. It's kind of a program that's all linked together.