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August 1, 2009updated 12 Apr 2017 4:34pm

Extinguishing the flames

Daniel Benoit, general manager of 2008s Captive Lessor of the Year, Xerox FS, speaks to Jason T Hesse about possible recovery in the market, customer bankruptcies, and how to drive growth during hard times. Looking back at Leasing Lifes November 2008 issue, Daniel Benoit says that the headline Industry on Fire was an accurate description of how the market was reacting to the crisis Benoit, who took over from Bret Thomas as general manager of Xerox Financial Services Europe at the end of 2008, says the crisis brought a tsunami of bad debt into the market, which caught many lessors by surprise.

By Jason T

Daniel Benoit, general
manager of 2008’s Captive Lessor of the Year, Xerox FS, speaks to
Jason T Hesse about
possible recovery in the market, customer bankruptcies, and how to
drive growth during hard times.

 

Looking back at Leasing Life’s
November 2008 issue, Daniel Benoit says that the headline ‘Industry
on Fire’ was an accurate description of how the market was reacting
to the crisis.

Benoit, who took over from Bret Thomas as
general manager of Xerox Financial Services Europe at the end of
2008, says the crisis brought a “tsunami of bad debt” into the
market, which caught many lessors by surprise.

“The headline was perfect,” Benoit says. “It
was the right description for the market – we saw many of our
competitors exiting the market, while many others were having
difficulties accessing funding at acceptable prices.”

He believes the industry has now reached its
“rebuilding” phase, however, and that, although there are still
many bankruptcies and a lot of bad debt from customers, lessors at
least know what to expect.

Xerox FS, says Benoit, has been quite stable
through it all.

“We have maintained our presence in all the
markets we operate in, throughout the storm,” he says. “It is part
of our raison d’être to support Xerox sales in whichever
sector or geography that Xerox operates in; and this has been well
perceived by our partners.”

The captive’s relationship with Xerox is
extremely close, and is based on three objectives:

• to support the sales of Xerox and
partners;

• to be a profitable business, and;

• to provide risk and lending expertise to
Xerox.

Its target penetration rate is 80 percent of
Xerox sales, from which the lessor is “not too far off” across its
European territories.

Bankruptcies

In terms of how it has been affected by the
recession, Benoit explains that the captive was primarily affected
by companies suddenly going bust.

“Although we have not seen that much growth in
arrears, we have seen companies with no late-payment history
suddenly go bankrupt,” he says.

“It is the first time I have seen this in my
career, and it is often because they will have a bank credit line
suddenly cut off. This happened a lot towards the end of last year,
and has led to a real increase in bankruptcies since then.”

To address this ‘sudden death’ scenario, Xerox
FS put into place a plan to try and anticipate problematic
customers. It regularly speaks to its larger customers to receive
quarterly business updates, and also monitors customers’ printing
usage levels.

“If you see a sudden drop in the volume that
the machines are printing, you can guess there might be a problem.
So instead of waiting, you can see the signs early on and act on
them, by restructuring a deal, for example,” Benoit explains.

The captive has also hired more employees
within its risk function, whose role is to engage with customers
and foster a positive relationship with them, with the aim of
discouraging late payment.

‘Difficult’ sales

Benoit’s mission as head of the business is to
continue to foster growth, which he believes is still possible
despite the economic climate:

“It is no secret that technology sales are
difficult right now, and we do not expect strong growth from
technology,” he adds. “Historically we have grown through our
parent’s innovation, and that is no different today.”

Indeed, the manufacturer has recently
developed new technology in the continuous feed market, where
printers print on rolls of paper which are cut afterwards. In
addition, Q309 will mark the launch of an A3 colour machine with
patented technology that will change the colour marketplace to
Xerox’s advantage.

“These are new markets for leasing as well,”
says Benoit. “These push us to develop new offerings, structures
that meet the product usage and lifecycle as well as end-user
financing requirements.”

Benoit believes that the innovation in the
manufacturer promotes leasing to also innovate in the way it
partners with Xerox to meet its objectives.

Continuous feed printers have a much longer
lifecycle, and therefore require longer leases. Benoit’s business
is therefore adapting its continuous feed proposition to leverage
the higher value business and create more growth.

The captive, which is also “keeping an eye” on
acquisitions, has also started to finance more non-Xerox assets –
today these make up around 8 percent of its portfolio.

“Where it makes sense for us to do so, we are
financing more third party equipment,” explains Benoit. “We are not
financing third party equipment for the sake of doing so; we only
do so when it makes sense for the end-customer, as part of a
solution that includes Xerox or for a reseller who sells Xerox
equipment.”

Market share

But Benoit also plans on growing the business
through improving market share across Europe.

“I do not see one single market where we do
not have opportunities. When a competitor leaves, it is an
opportunity for us to capture more market share,” he says.

Indeed, whenever the captive hears of a third
party funder withdrawing, Xerox FS will go and visit the third
party’s vendors and resellers to try and win them over, says
Benoit, adding that this has been quite a successful approach so
far.

“Part of the success is due to our value
proposition, but part of it is also because resellers who have been
abandoned by a third party lessor want the security of a long-term
partner,” he explains.

Looking at the future of the market, Benoit
says he is “fairly optimistic”; as he believes demand for leasing
will continue to grow.

“In the end, the crisis will have eliminated
irrational behaviour. There will be a big back-to-basics in the
industry in terms of the way risk is considered and in terms of
customer relationship and the market will benefit from this – we
need to stay positive and optimistic.”

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