<strong>Ross Williams, President & Chief Executive of Hyundai Capital America</strong>, will sit down for a "fireside chat" to address key market dynamics. [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box"> 00:00 So, you after you finished school 00:06 you went to the gym. So where was your first gig after that? My first gig was actually at a finance company. I TP 00:17 so both conglomerate, but it actually goes deeper today. So my first day the job I actually went to collect some money from a dealer and a not so good part of the trade Michigan and I learned a little lesson on how you should collect and how you should not register. It's right next cool, okay. At least you can check it out off your lifestyle. And then I was and then what where'd you go for that effort? So far our diabetes portfolio and I went to work for Deutsche Bank and spent a lot of time into different roles. And 00:55 again, when you're cutting teeth in the servicing side yards 01:00 With all the different shares that are typically expected back then 01:05 and GE cap than GE Capital One, which makes portfolio so it's a quite another type of employee. That's correct. You seem to be able to navigate those integrations, the proper way to say That's right. That's right. So each one of them, JJ to work on great opportunity. So 01:26 you're provided also an opportunity to relocate to Detroit to Chicago to Atlanta, etc, etc. Okay. And then 2010 you got to come back. So what brought you there? So, it was actually no acquisition, no acquisition? No, it was, you know, as many people in this room know, it was an interesting time in 2010. Right. So we're, I think we're fading the 01:53 call, but I don't want to bring that down. Right, right. Ultimately, it wasn't. It was an opportunity. 02:00 So start off session winding down a finance business in Atlanta, Georgia, and at the same time looking for opportunities and a great app to pop up to run the dealer credit family to make capital. So I packed my bags and moved to Atlanta, Georgia to sunny Southern California. And I haven't looked back since it was actually kind of a pain. Oh, fantastic. 02:24 So tell me about your experience 02:28 in public capital. So you started as a the VP? Right going into my club. 02:38 Commercial credit. Where'd you come from that? Yeah. So you know, somebody must have thought I did something right. So they had a great opportunity there she was the sales and marketing team of honey get Hoover growing at lightspeed back then. So I took advantage of moving away from just you know, just the democratic side. 03:00 Before consumer side and your right side that was a wonderful experience. Again, 03:06 great power back then 03:10 just opportunity to the door for anybody in the company. 03:15 And then when did When did you get up to win the thing send you to Canada. So part of this is me raising my hand I just 03:26 want to say so I think next time some are going to do I actually have raised my head to go start up our honey capital business in Canada, which again was a different type of experience but it was starting from scratch. But it was another one of my wonderful experiences to go start the business I wish I would have stayed up there a little bit longer but ultimately they had a lot of fun doing that a lot of great people I saw some some old colleagues last night in fact it was a great memory of it what about you watching business from scratches could break and then 04:00 And then they is a raise your hand type of thing to come back to this one that was not raised. And that was actually a copyright. So, but no, there was an opportunity with some change of leadership in the US. I always wanted to come back at a certain point in time, but ultimately I moved back from Toronto to California, take on the CEO position, three and a half years ago, three plus years ago. So you've got right now this is, this is an end of 2017. 04:32 Approximately 31 billion of outstandings and the 13th largest lender in the nation. 04:44 It's a 04:47 skewed right, skewed a little bit more towards the least side in terms of outstandings. That's 17. This is again in the 17th 2018 millions a little shorter 05:00 And about 13 and a half billion of the loan outstandings. 05:08 Effectively flat year over year that 05:12 where are you at today? And how are you feeling about where we're at is so a little bit better or a little bit deeper look on the portfolio right now we're 5050 on the retail side, at least retail. We also have about two plus billion dollars and in dealer financials. So that's actually the primary piece of our portfolio. I think we, you know, again, I remember celebrating and reaching $10 million in assets seven years ago, that a couple years later was 20 million a couple years later was 30 million. So I think for those of us that don't when you grow like that, you you It's great, but you also have other general news that mostly on the operation side, so can you give us an example 06:00 Yeah, so maybe we don't we can't really talk, right. So for if you do something wrong, you can cover it up just broke. But a good example would be, I would say, you know, on the surface anxiety, right? So, especially when you don't have returning leaf customers, so you know, the bill out our release and processes and our remarketing channels back in 2017, into actually 2016 for that matter, or a great example, you didn't have to think about it. You have two years before that, but we really had to think about it. The other thousand 200,000 at the back, I think Secondly, you have you know, you can always run a manual processes. And we had a lot to show you without using technology, you when you're growing, you can bypass that. So this year, we spent a lot of time looking at all of our manual processes, understanding what makes sense to just eliminate what makes sense to to improve what makes sense to actually have technical 07:00 knology to help him become a top earner this year. So can you set you know, as the CEO, what kind of what kind of goal you set for that? I mean, you say, you know, I want to eliminate pest visit by percentage or is it in a particular area? How do you kind of prioritize? Well, we so great, great question. We didn't know what we had this year. So first step was doing something. So for example, a self servicing side, the collection side, whatever processes or 07:36 manual steps are needed or not needed. So this year was the year of assessment took about six months for auditing all through it, and then we have a very good plan. Now we've accepted the quantitative goals, elimination of waste, elimination of headcount, outsourcing, which is another piece of this too. So we have a goal set for next year based on our discovery this year. 08:00 So, what would be in this regard? What's kind of the practical aspects of this plant? What would you what would what should? What should we, you know, what can we expect? Yeah. So I look at the back that are clearly probably complimentary as one of the, you know, the goals. So we have, we have some challenging costs, or efficiency goals set for next year, and be with me to kind of get lost there in that. And so, we've actually brought some partners in to help us out on the assessment side, you have software we're reusing not using. So okay, all that together as good as our more optimal efficiency goal was for the sake I think translates into customer experience at the end with that. So what's it like what's the customer experience like, you know, for Hyundai and Kia jets to maybe I think 09:00 We'll hear no, but maybe not want to just define the three brands so that everyone knows what they're, what the implications are from it. hch? Sure, sure. So we know a couple America goes to market as keyboardist today if it weren't for data from Genesis, finance, justice, finance being very new. But in terms of Hyundai Motor finance and keyboard finance, they're roughly about 15% of our business each. So green Bowers, they're also you know, significant competitors in the market. So we're been switching, you know, when it comes to this from a finance company standpoint, but I'll say ultimately, the the impact of the customer side is, again, when you're growing fast, and you can mask a lot of things. I think my opinion on where we stand on the consumer service side is average. And I think third parties interphase our own internal surveys will suggest average or better when I'm still sticking with Apple weed right? It just puts the whole 10:00 What's your average across the aisle say we have, we have put a lot of people good people inside of our operations. So, so but is that the most efficient way and they feel good from a customer standpoint, survey it again, giving a live voice as an example. That may feel good. So in surveys, they indicate that service can be good, but ultimately isn't the most efficient, and is that the root is a service of interaction, what made you want to talk? So, so we've, we've really put a lot of bodies after the last few years, even our enemies approach and determine where we actually don't need people. So that's my efficiency objective, which is going to be very, very important check them so that they just understand in terms of an allocation of resources. 10:56 I think the credit performance on the key aside 11:00 has been, has been Hyundai's kind of a stronger credit performance, does that play into kind of this this sort of strategy on on the on the resource allocations is it really just, you know, a matter of applying consistent technologies across the board and you know, you don't really make this sort of brand distinction. I think the differentiation for us, between the different brands is mostly on the dealer service side. So we have fully separated sales staff. We actually have three oil four sets of sales staff, we have a akia dedicated sales staff which would be, you know, Jason into their field structure or regional structure. We have a dedicated Hyundai finance, sales staff. We have a dedicated up and coming Genesis maintenance staff, but very, very small right now. We also have a dedicated sales staff for our mandate. 12:00 protection products under warranty business. We have four dedicated staff for dedicated field staff that are to really help Papa separate yourself in the mind as soon as it comes inside the office. So from the application funding and all the servicing, we focus more on 12:19 a center of excellence approach where we treat every morning we don't separate between. So we also have dedicated program people each a week or so Switzer going in. 12:33 So I'm not going to call out. I would think, though that just in on this set on the sales side, though, the it seems like the greatest dynamism is on Genesis in terms of 12:49 stealth, but what else like, you know what, commentator Let me ask, like, how much of your time I'm focusing on building that that side of your business? But yes, it's our say 13:00 In the process remind you right now, you know, Genesis has to sit two premium sedan vehicles on the market right now for third coming right now as we speak. So the scale for the mall is something that I need to be conscious of employees, our dedicated staff, I think on the back end adequate we can, we can clearly, you know, treat your customers differently when it comes to the servicing side and the contact side. So that's something we're already doing. Like 13:27 I always take the fast follower for 13:31 something very new big launch, which was a great example of that before they've got a lot of great vehicles coming in the future that allow us to ramp up the law in parallel with how the the manufacturing age, right. 13:48 I know that you've felt when we were kind of preparing. You mentioned that 13:55 there's a need for if you're looking to diversify the world 14:01 Ah, tell tell us about that. What's the what's sort of the, the kind of the X or the, or the goal there and what's allowed? Yeah, I think, 14:13 you know, we always, you know, I, you know, I enjoy getting feedback from unbiased parties, like rating agencies as a matter of fact, whether whether I won or not going to get it anyways, but ultimately, the new locker comparison, you know, and, I mean, we're new, we're headed in the market for for a long time really come in the coming of age, after a recession. I will say if I look at our portfolio, so your rating engine will focus on financial performance, but also give you know, give some some, you know, qualitative feedback on other views. So we have, you know, really pretty well balanced consumer retail lease portfolio. I think where we have opportunities to be more CPO business that's one of the areas of opportunity, the secondly on the commercial side, define 15:00 Two ways. You know, dealer finance, I mentioned earlier, we have $2 billion in loans to dealers. I'd like to see that double Actually, that's our This is in 19. No, it'll take a little bit longer than that. But 15:16 by December so I don't know if it's, it's aspirational. It is really meant to be yes. Right. Correct. So, how do you kind of what do you do for that? Yeah. So we are working on a you know, for the captives. So for those who don't sure it was all about the value proposition right. So is your value proposition strong to drive or do you want to bring it into the into the captain, so strengthening our value proposition to our floorplan theaters is really top of mind right now. And when we're working on rolling out something new next year, that will be a real strong value proposition MBT. 15:57 The other pieces are insurance or working business. 16:00 We've got a real good partner that we've had for about five years and we actually use them in the audience today. I think of that as being a very good opportunity for us to move forward. So between then not only the dealer side of commercial business, but you know, business end users on both of these two, we're dabbling in it. We don't have to say good programs to support that sideline business too. But that's another great example where I see a diversified portfolio make sure last us especially if we see you know that kind of like, you know, a pullback coming up in the future be great for longer stocks. Is that is that your expectation? Yes. 16:40 What do you post? 16:42 So is that your bold question? 16:45 anyway? 16:49 You can only well the era love the up for so long right? 16:56 is typical business and the best prepared you are especially as 17:00 Capital. So captains, you know that they can really provide your value if there is some Distress in the market. And I almost look forward to that, that really good and also short that I have the opportunity to go back to what I said, which is, you know, build out the portfolio. Right? There's quite a bit when they talk about a value proposition. 17:21 So you're at what's the financing penetration rate right now? For the capital? Yeah. So this year, we're running. Again, it's different by brand shirt from the one that does aggregate who want to pay 40 50% of men who are expected to be in 2018 alone at the end of the year, average. 17:44 friggin so. 17:46 So my question is, you know, what's your goal for, let's say, 19 or 20, whichever is how you going to build the build there and kind of what's five 18:00 So I'll say historically, JJ, we've, we've been fast 70%. And as low as, you know, low 40s in a increasing interest rate environment, who's that? Dude, anybody, you know, we have a disadvantage of the way we fund our business. So I do expect him to go to certain level of pattern, especially in the novice and then loans to the very efficient lenders like credit unions and banks, and that's okay. So enterprise level to capital when the Oh yeah, I always focus on what's the most efficient, efficient way to stop. So I expect kind of a little bit lower during a rising interest rate environment that attracts up go, go Go swing the other way. So 18:43 the 18:46 Why do you feel that way? When we're kind of coming to sort of end of this zero percent era, which is a long era? 18:59 How do you feel about 19:00 From that, you know, considering those kinds of 19:04 data. Yeah, I mean, I think they're the move away from sir overspent is because it's too costly for the OEMs. Right. So that's part of interest rates rising, right. So, same, same principle interest rates are rising, you know, you know, subvention programs are going to be less than mobile cash to, you know, to Kanaan. kaplin. Lenders putting more info for the foreseeable future, interest rates rise, as soon as a plateau change. I look for that, for that to actually look for a little bit more actually has a capital one. 19:38 Not so much that. Okay, we have great questions from the audience. And I know we have other questions, but I can kind of take a timeout as some of these are going on. Okay. Where do you currently leverage analytics across your teams? How do you see other organizations leveraging data to drive incremental? Wow. Yeah. So I think there's a 20:00 But there's a lot of examples of this. 20:04 Actually, right now we have hundreds of thousands of off leased vehicles coming back. So the pricing of those cars, what do we want our our franchise to do is fine, but we actually want to think of the market. We are we're leveraging analytics to really help us out understand that. It has been a real strong success after a big investment back in 2016 17. So that would be one example. Can you just kind of give us a bit more? Help sumption exactly what that means? So like, if you're saying that it's stressful, what does that mean? You have? You're able to get a pension. Yeah, so I'm saying so practically, right. So you want to price your vehicles correctly in a certain market. You want to maximize your franchise deals, buying vehicles, so you want to set the right price. 21:00 That's exactly true franchise, a lot was never meant to be for the record. So but ultimately, I think one of the, one of the objectives, we had to keep vehicles out of the options as much as possible. So we use oil when it could help us out to be the best as possible. And I think another area that we use strong analytics and, you know, in one way, you know, Collins hornbostel be out here a little while but loyalty can be loyalty is one of our strongest value adds to off to all three of our OEMs. So So Mark does a great job of using analytics to provide leads back to our dealers, customers that that they'd be very right to either return their vehicle for buying a vehicle. So you have the front end side, which is loyalty and creating incremental sales. And another example would be would be the back end side. I think our listing does a fantastic job also using analytics to help price our programs to get some organic 22:00 It also goes to reiterate quickly this this I guess centers in on your notion of least efficient vehicles crap 22:11 so and oh no don't say analytics separate least efficient vehicles to me are about are much more about 22:20 what makes sense enterprise enterprise maintenance company or leasing company as well as the OEM. So, so these initial vehicles or vehicles that extra residuals which help keep this invention costs to the OEMs down these lease efficient vehicles are the vehicles that the consumers are going to want to release when they bring their lease back. So I think it is a combination of high volume lease where you got a nice advertised advertisement payment and secondly, that is cost efficient to the OEM and the finance company and so those will be will be the the overall balance 23:00 All these efficiently? And so what are you doing on that? I mean, how does that play into? What's going on? Yeah, so I mean, we have, we spent a lot of time with OEM partners, but then use analytics in this case to provide recommendations on what we consider leased vehicles. Now, they're also focused on what what their competitors are doing, of course, right. So that's kind of the marrying of the you know, the analysis on the residual side, the cost side, this adventure silo on what's going on in the market with with pure sets, especially when you when you have high volume vehicles like a midsize sedan. Okay, how it 23:39 segues nicely for this question. How is customer consumer spending because consumer demand the credit health of the consumer? Are you having to stretch more to move metal particularly as the star of the cops? Yeah, so that's a that's what we do every day. 24:00 But I will say, no more abstraction where we've actually made. So we made some policy adjustments. Big policy. This was back in 2016, when we saw our portfolio non performing, like we had forecasted. So like I think we were a little bit ahead of the game. And then since then we've been very consistent on our policy, our approach to our dealer network, and not having had to stretch too much. Now sadly, it's also present position where we're not penson as high as it was in the past. But we have a obviously a very healthy portfolio right now after being two to two plus years in making some some some needed policy adjustments. If indeed in the future, we need to stretch it over all these things that are current, our current or our job or value proposition, but I would say the focus on the ultimate portfolio has been been a top part of the film years. Okay. How do you maximize the 25:00 retention within such a price competitive segment of the market that you know that for Hyundai and Kia Yeah, so so we have a, we have about 100% of the lease and the servicing team that gets up to customers wealden vans have returned nothing ever again, I think this is uncommon, but we use that team as kind of a package sales team to try to offer the customer stated leases. And then you have programs I mean, at least programs are paramount for a customer coming back. They're wanting a similar rate. But the challenge right, the house payments are similar. We're all going up based based primarily on the US RPS and your interest rates going on. So so we had a dedicated team as I mentioned earlier, we've got signal books that what customers are going to be likely to release by the a good equity position, good performance, and then that also is setting counter spot to 26:00 To talk to the customer and get them back to the dealership. 26:04 There's a question here on house, excuse me, how is the increase in interest rates impacted consumer demand? 26:14 Will the borrower's monthly Costco share? So maybe dealing with that part and then how, you know what, what's your sense over the last, you know, 26:25 month or two couple months? Yeah, I would say you know, so interest rates is one costs of going up. The second one is going to be the price of the vehicles to 26:38 new Evie new SUV. See these are all increasing the price of commercials killers is impacting affordability. So it's a drastic right down the road. But it's there's definitely slow incremental upgrades and as you start being used, and that we'll look at that before Louis for custom especially to get down to the you know, to the 27:00 Non prime planning? and to what degree do you think that you'll be able to keep that monthly cost flat? While we were always asked to keep it very flat so says there are new partners that are only partners that said, we tried very hard to focus on, as I mentioned, certain vehicles that have better residuals that kind of help keep the payment increase the price increase down. But it's, it's challenging. that's a that's a very challenging area right now. And then again, back to technology, increasing the MSRP of vehicles. It's a bit it's a big challenge. It's gonna be a challenge for everybody. We have a couple minutes left, and I wanted to just get your your, you know, here you hear you speak on how you're thinking about mobility, new new modes of 27:56 vehicle acquisition and companionship. 28:00 You have an interesting product that you've introduced recently, and a plus, how do you think about these things? Yeah, it's a very dynamic time, just been into the office a couple years. And I'm shocked by the number of partnerships available for the technology side of it. All of these help support a different ownership structure going forward. You know, again, as a captive, you know, we are very focused on supporting our three or three OEMs. So what they do will drive what we do, but we're gonna, we're gonna, we're gonna 28:44 have to learn customers. And you know how they can do that or we'll talk about that a little bit later, but so we're going to traffic but also at the same kind of be conscious of where our OEM partners are going. And then I think as a fan 29:00 tastic opportunity for Catholics because things are going to change. And, you know, our in our charter is to support what they do. And if they go down a certain path of 29:11 mobility is provided a wonderful opportunity to be supportive to them, but to the dealer network. So so so frankly, JJ, I look forward to that as a great opportunity to change the model. You know, it's, uh, you know, a lot of lenders out there right now, they're participating in a while saving improvement in long term interest and things are gonna change. So different structures and facilities, whether they be, you know, you know, b2b facilities from dealers, structures or loans, in different ownership structures. 29:42 Those are all pretty good opportunities for the consumer. Again, leveraging partnerships. I think that's a that's a fantastic opportunity to establish a partnership. We're we sat together again next year at this time, and what would you expect 30:00 would be the result, the results of some of these efforts that you're undergoing? Yeah, so the 100 plus example, right, it's a it's a product that has, you know, you know, bundled bundled features. I don't know what we're testing right now there's, there's interesting feedback. So really answer your question, I hope they'll be going through different caps with different other beauty products or structures to do our Carver's and we have some you know, some that didn't work that didn't work for that work that should hopefully definitely get by next year. And what what are your personal goals for next year? 30:38 So again, are you a finance guy by trade, so I really want a healthy portfolio and have the capital Erica, how about really supporting the Genesis brand launch that's it that's a capital about to become more efficient, or our organization is is so the people side of it is in great shape right now, historically about entrepreneurship. 31:00 Place but it's been great. last couple years, we've got real steady leadership teams. So I'd love to see that team expand and maybe do some different things inside the organization. That would it would be a 31:11 great personal reward for me, if that makes sense. I think a lot of little things to 31:16 pass. Thanks, Ross. Thank you very much </div> [/toggle]
