Daimler Mobility slows origination volume to preserve cash

Daimler Mobility is tightening its origination volume as its parent Daimler AG shifts gears to full cash-preservation mode, said Harald Wilhelm, who serves on Daimler’s board of management and oversees finance, controlling and Daimler Mobility, in an investor relations webcast today.

The captive’s total originations clocked in just shy of $30 billion in the U.S. last year, according to Big Wheels Auto Finance Data.

“In the current situation we take less new business on board, which means less cash out to sort the financing,” Wilhelm said. A reduction in purchased retail contracts or leases will allow the captive to hold onto $3 million in cash and cash equivalents.

Moreover, Daimler Mobility is experiencing a “high demand for payment deferrals,” Wilhelm added, noting that the captive expects delinquencies and net credit losses to increase in the future.

When captive finance subsidiaries wind down origination volumes, their parent companies are provided with a source of cash until their portfolios swing back to growth, according to Moody’s Investors Service. Liquidity is not a concern for most European OEMs and captives, Moody’s noted, which provides a “degree of confidence in their ability to manage through the next few quarters of high cash burn.”

Daimler AG had a gross liquidity of $26.1 billion at the end of fiscal year 2019, which included a $12 billion revolving credit facility with a term until 2025. The German automaker also further increased its liquidity with an addition of a $13 million facility syndicated by BNP, Banco Santander, Deutsche Bank and JPMorgan Chase, and issued a $1.63 billion, five-year benchmark bond on the eurobond market earlier this week.

For Mercedes-Benz cars, excluding Smart cars, the OEM reported sales of 465,000 units, representing a 12% year-over-year decline during the first quarter of 2020. The drop in sales comes on the heels of temporary factory closures in China, Europe and the U.S. announced March 17.