BMW Group has “temporarily”
ceased new business origination at Alphabet and Alphera, the
manufacturer said.
“Our focus is on our core brands. We
are therefore limiting our activities first and foremost to the
financing and leasing of BMW Group products,” BMW said of the
decision.
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Alphera was set up to provide
point-of-sale financing for customers of non-BMW vehicles, while
Alphabet is a multi-marque fleet management and leasing company,
providing cars and commercial vehicles from all manufacturers to
its customers. Both units are part of BMW’s Financial Services
division.
The decision to stop taking on new
contracts is “due to the strong rise in refinancing costs as a
result of the financial crisis”, BMW said, as well as the
“difficulty” in reflecting these higher costs in the rentals paid
by customers.
A BMW spokesman confirmed that the
decision applied to Alphabet and Alphera’s global operations.
BMW Financial Services reported a
pre-tax loss of €17 million for the third quarter of 2008, with bad
debts and plummeting residual values blamed for the result, a stark
contrast with the €191 million pre-tax profit made by the division
in the same period last year. The captive’s risk provision expense
for the nine months to 30 September was €477 million, it said.
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By GlobalDataNew business at Alphabet, which is
part of the Financial Services division, grew strongly over the
first nine months of the year, up 19.8 percent on 2007 to 315,351
contracts worldwide.
In its Q3 report (see page 8), BMW
noted the strength of its liquidity base “despite the current
financial crisis”, boasting of access to “a diversified and
flexible range of funding sources” to finance its operations.
“In addition to issuing bonds and
commercial papers, this also includes the use of asset-backed
securities, bank credits and loan notes [which] are primarily used
to finance the financial services business of the BMW Group,” the
manufacturer said.
However, BMW chairman Norbert
Reithofer commented in a Q3 earnings conference call that earnings
take precedence over volumes.
BMW’s decision to halt new business at
Alphabet and Alphera will remain in effect “until the debt capital
markets show signs of a sustainable recovery” – although it
confirmed it remains “committed” to the dealer financing and fleet
leasing units.
An industry source commented that the
decision to stop new business at Alphera would be “very bad news”
for brokers, for whom Alphera was a major funding partner.
“For brokers, the two main players
left to them are GE Money and Santander – and we all know what is
happening to them in the near future,” the source added, referring
to the forthcoming merger of the two motor finance providers.
