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May 22, 2012updated 12 Apr 2017 4:07pm

Captive audience

Fred Crawley interviews the man at the helm of the Captives Forum to find out how a quarterly conversation between friends became an international lobbying movement The fervour surrounding bank vendor finance programmes might give the impression that the world of sales-aid finance is moving away from the traditional captive model but is the problem simply that manufacturers are lacking a voice on the international stage?

By Fred Crawley

Fred Crawley interviews the man at the helm of the Captives Forum to find out how a quarterly conversation between friends became an international lobbying movement

The fervour surrounding bank vendor finance programmes might give the impression that the world of sales-aid finance is moving away from the traditional captive model – but is the problem simply that manufacturers are lacking a voice on the international stage?

Not if Patrick Jelly, chairman of the Captives Forum and managing director of Pitney Bowes Global Financial Services, has anything to do with it.

Fred Crawley: How did the forum get started? Patrick Jelly

Patrick Jelly: The forum started six or seven years ago, when my old colleague Bret Thomas [general manager at Xerox Global Leasing] and I used to meet informally and share best practise. While there were plenty of asset-specific discussion forums at the time, there seemed to be nothing exclusively for captives. Captives, by virtue of having only one customer, are always fighting the tendency to be inward looking and out of touch with the marketplace, and welcomed the chance to share best practise as a group.

FC: What’s changed recently?

PJ: The forum was funded by Pitney Bowes and Xerox for the first few years, and started as an informal gathering. As we took on more members, however, we realised some larger companies wanted a bit more formality, and a clear mandate. As such we registered as a not-for-profit organisation two years ago, formed an executive committee, and have seen a lot more external interest as a result.

Our quarterly meetings see us host speakers from national governments, the EU, large professional firms – Moody’s will be presenting at the next meeting – and we’ve been able to represent manufacturers on a truly pan-European level. Our venues reflect this, cycling between Paris, Brussels and London.

With a greater level of formality came a need for the forum to act as a lobbying organisation, because that’s where captives really need a single, global voice. As such we’ve worked closely with Leaseurope’s efforts on lease accounting, for example.

FC: What are the rules in terms of membership, and how do you see that changing?

PJ: Obviously, manufacturer ownership is essential. In national-level forums, we find that banks tend to dominate the agenda. For captives, however, the shared objective is sales-aid performance rather than return; we are there to increase manufacturer sales. Not that we would exclude people with local bank relationships, that is. We also recognise the value of best practise advice from companies such as GE Capital, which have gone on to finance assets other than their own parent company’s, and have engaged with them as speakers at meetings.

Captives Forum membersFC: What about the big automotive captives?

PJ: We’ve never sought to exclude them at all, but historically they’ve been well represented at national level. There has been more interest recently, however, and we expect that over the next couple of months one or possibly two of the large carmakers will join us.

FC: What are the biggest issues under discussion between members?

PJ: One big issue is the lack of funding for SMEs, and how as captive lenders we are a major funder of SMEs but are excluded from any borrowing schemes, government schemes, competitive funding rates and the like. Pitney Bowes’ customer base, for example, is 80% SMEs.

It’s wrong to exclude captives from funding incentives, especially when banks are not providing proactive support. There isn’t a deal done anywhere in the world that doesn’t have a manufacturer selling something first. Therefore our view is clear – we exist to provide a payment solution. We’re lobbying government to get a voice, but it’s very difficult at the moment.

FC: What are members talking about in terms of internal, rather than external, factors?

PJ: Customer retention. There’s a lot to be talked about in terms of how we manage lease portfolios to provide customer retention benefits to parent companies; how we provide not just financial support but ensure that customer support is a key part of what we provide to the manufacturer. Post, for example, is a declining market, so how we in the finance arm of Pitney Bowes help the group as a whole retain customers has been of massive significance.

FC: It has been argued that the prioritisation of sales aid over margin associated with traditional captive finance is eroding as captivesparents are having to “think more like banks” – what is your view on this?

PJ: The value of a captive is in helping a manufacturer sell more and make more margin – as such, we try to think utterly unlike a bank.

Yes, we are a lending organisation so we have the same governance as anyone else, but the difference is that as a true captive you live and breathe your asset – you have a huge benefit in being able to leverage your asset, and we use it to our advantage.

With the greatest respect to bank lessors, I feel that captive operations can do a lot more for manufacturers, and the Captives Forum exists to explore just how much that is. 

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