Although the UK arm of Volkswagen
Financial Services continues to see growth, its managing director,
Graham Wheeler, is cautious about the future. Such pragmatism
possibly stems from his early days in collections in Glasgow, as
Fred Crawley discovers.

Graham Wheeler is a man who knows how to balance many
priorities. After an involved meeting with Volkswagen Financial
Services’ head of IT Gerhard Naegele and White Clark Group founder
Dara Clarke, he manages to find half an hour to discuss VWFS
strategies for 2009, before having to rush to his hotel room to
prepare for an awards dinner.

Despite the demands on his time, he is concise and passionate
about setting the scene for VWFS over the next 12 months. Although
he is proud of the position his business is in – 2008 has seen
lending soar past £1 billion (€1.2 billion) months ahead of 2007,
and fleet ranking move from 19th to 13th – he is frank and
pragmatic about the tough conditions ahead.

“2009 will be difficult for us all,” he says, speaking for VWFS
and for the captive finance market at large. “The recession will
certainly reduce business opportunity, and we will need to balance
our costs accordingly. We have high volumes of new contracts, and
very high finance penetration – but increasing levels of arrears,
bad debt and vehicle returns.”

Wheeler is no stranger to hostile conditions. Whereas many asset
finance MDs start their careers in sales or back office roles,
Wheeler began as a collections manager for Provident Personal
Credit in Glasgow in 1982.

One strategy for VWFS’ continued prosperity, according to
Wheeler, is the spreading of risk across many areas of the
business: “Trading in such an environment is tough, and requires a
blend of products, services and campaigns. We are always reviewing
our range of products and propositions in order to minimise risk
and maximise performance.”

Along these lines, VWFS has followed in the footsteps of its
parent. Volkswagen Group as a manufacturer is known for its
prolific approach to unveiling new vehicles – 2008 alone has seen
the release of the Volkswagen Scirocco, Tiguan and Passat CC, plus
the Audi Q5, Skoda Superb and SEAT Ibiza.

Within the sphere of finance provision, things are no quieter.
VWFS is engaged in an effort to take advantage of every possible
sales niche through offering a battery of finance products, and
during 2008 launched more than 75 finance campaigns.

At the end of 2008’s first half, the VWFS financial report
showed a 258 percent year-on-year rise in the value of service and
maintenance contracts signed. This was due in part to offers such
as the £209-per-month Transporter van plan, and subsequent
equivalents for the Caddy and Caddy Maxi vans.

Wheeler is also keen to stress the company’s emphasis on
insurance products, with a steadily growing motor insurance
portfolio and a quote-and-buy website going online soon. With so
many financial products being offered, says Wheeler, VWFS is well
placed to pick up revenue wherever opportunity may lie, and equally
well placed to survive major sales hits in individual markets.

Wider focus

This risk-spreading approach translates across to Volkswagen’s
fleet business in the UK, where VWFS leases and manages fleets of
anywhere between one and 400 vehicles. This focus variety extends
once again to financial products attached to the fleet business,
with the latest release being a Volkswagen Group Leasing fuel card
developed in conjunction with Arval.

The most visible spread of VWFS products across different
markets can be seen in the offering of finance across eight brands:
Volkswagen Passenger, Volkswagen Commercial Vehicles, Audi, SEAT,
Skoda, Bentley, Lamborghini and Bugatti. “Volkswagen Group,”
according to Wheeler, “has the largest and most diverse cross
section of brand profiles in the industry.” Whereas each of these
brands operates as a different business in terms of sales and
marketing, they all benefit from economies of scale in using an
overarching finance and back office superstructure provided by
VWFS.

VWFS has to be more than simply a money lender, Wheeler says:
“The philosophy of the companies is also seen as being about ‘the
brands creating the dreams [ie the vehicles customers want], and
VWFS realising them’. This relationship includes not just
manufacturing and financing arms, but importers, retailers and
maintenance services also.”

With future prosperity riding on the success of this intense
communications strategy, the importance of IT systems for VWFS
becomes abundantly clear. This is the reason for Wheeler’s meeting
with Dara Clarke: VWFS is currently working with White Clarke Group
to implement a new IT infrastructure which will eventually
interface with the Volkswagen Group’s vehicle ordering, logistics,
and customer management systems.

“Having a full view of our customer,” says Wheeler, “from the
point of vehicle order through to servicing, warranty work, the
overall customer experience, their finances, motor insurance and
claim information will be essential in allowing us to provide the
service we need to deliver.”

At present, Wheeler is confident that 2008’s year-end results
will see VWFS ahead of 2007 in terms of volume across all areas of
reporting, but with default on the increase across the industry and
margins under pressure, profit is more difficult to predict.
Certainly, 2009 will be a year of consolidation, with a major
emphasis on bedding-in new systems, maximising process efficiency,
and using Volkswagen Group’s enormous spread of physical and
financial products to take advantage of all possible business
opportunities.

A recent staff engagement survey at VWFS’ headquarters in Milton
Keynes has shown morale to be extremely high among the company’s
450 staff, and Wheeler is sure that his organisation is in the
right frame of mind to deal with the worsening condition of the
automotive industry.

When asked what he expects from VWFS over the next 12 months,
his answer is immediate: “Stability, growth and commitment –
commitment from brands, colleagues, retailers and customers. By
continuing to work together we can weather the storm of 2009, and
be best placed to take advantage of the inevitable growth in 2010
and beyond.”