Auto lenders are trimming the fat from their budgets as declining loan volume pressures profits.
“Everybody is in cost-cutter mode,” said Rich Damschen, marketing analytics and business strategy manager at subprime lender Westlake Financial Services.
Already, Los Angeles-based Westlake has pared back attendance at some industry events. “The first thing to go for everyone is conferences and travel,” Damschen said. “There are a couple of conferences we’ve decided not to go to.”
Drive, a unit of Santander Consumer USA Inc., has not implemented any mandatory restrictions, but travel requests are “looked at much more seriously,” said Laurie Kight, a company spokeswoman. Though the company “has always been lean,” she said, now senior executives might ask: “Do you really need to go? Do we all need to go? Can we do this meeting over the phone?”
For the most part, though, lenders have yet to shelve major initiatives. But they are paying more attention to the specific costs involved.
“We are basically handling this by doing less, across the board, but not eliminating anything,” said a senior executive at BMW Financial Services who declined to be named. “So, we are doing less training and seminars, but doing some. Same for inter-company travel and meetings, software buys, etc.”
“The business case ‘hurdle rate’ has gone up, but we’re still moving along, just more slowly,” the BMW executive added.
In general, lenders have stepped up efforts to reduce costs on all fronts. “In the current environment, everyone is more mindful of expenses,” said Kerry Rivera, a Toyota Financial Services spokeswoman. For the past several years, Toyota has had an operational excellence initiative that calls for scrutiny “not only from a cost standpoint, but also from a productivity standpoint,” she said. Still, the company continues to launch new projects.
Westlake, too, is keeping on with projects in the works. “We’ve changed some of our timelines,” though, Damschen said.
In addition to reviews of internal operations, lenders have beefed up audits of dealer performance as a means to improve efficiency. “Like other lenders, we want to make sure our markets are profitable, to make sure dealers are profitable,” Kight said. “We’re always evaluating them for profitability. If it doesn’t make sense, we cut them off.”
Another lender who declined to be named put it this way: “We are looking very closely at loss avoidance as ways to cut costs, like aligning ourselves with collections to identify trends that could help on the front end.”
“We are at a different level than ever before in terms of ways to identify savings,” he added.