MAN Financial Services expects a
stronger second half of 2009 and is planning to acquire more of
Euro-Leasing – and could be interested in buying the company in
total
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With the commercial vehicle
leasing sector struggling across Europe, it comes as little
surprise that many lessors have completely pulled out of the
market, while others are significantly reducing business and almost
nobody is making a profit.
Nonetheless, MAN Finance
International, the financing unit of Germany’s MAN SE, has sought
to do most of the things that a sensible business can do to
minimise losses during the recession.
In fact, according to Elliot Lennick,
who is in charge of the captive’s business in the UK as well as
northern and eastern Europe, signs that MAN Finance is doing better
than many others are already visible in its new business volumes,
which have fallen less than the industry average.
Compared with last year, when total
new business reached €1.3 billion, this year the
Munich-headquartered company wrote €450 million in the first six
months. As the company predicts the second half of 2009 will be
stronger than the first, it expects this figure will reach €1.1
billion by year end.
This compares with a 45 percent volume
drop in the market seen so far, with peaks of over 90 percent in
countries in the CEE region. Similarly, the company’s penetration
rate increased from 25 percent last year to 30 percent for the
first six months of 2009 – and currently is over 70 percent in the
UK – as, claimed Lennick, fewer banks are giving lines of credit
and many customers come directly to the captive.
Higher borrowing costs and risk
provisions led to an operating loss in the first half of 2009 of
€24 million at MAN’s financial services division – compared to a €7
million profit in the first half of 2008.
But despite the increased risk costs,
Lennick said that MAN Finance – which currently operates in 19
European countries and is ranked second in Germany’s CV leasing
market with over a fifth of the market and a portfolio of €1
billion – has deployed a detailed strategy to weather the storm and
come out of it successfully.
Weathering the storm
The company, which has a total of
238 staff, has bolstered its credit department with an extra dozen
staff. According to Lennick, this is part of an increased emphasis
on credit control in general, with an improvement on credit
analysis and more detailed weekly reporting.
In terms of asset types, Lennick said
that the drop seen in the new truck and coach market has been
offset by a “reasonably buoyant” bus market.
“We are talking to the major bus
companies, and volumes can be very large there,” Lennick said.
Similarly, the company has made a push
into the second-hand vehicles sector, with a campaign being set by
the manufacturer to sell more used vehicles, alongside a general
extension of current contracts for customers delaying their next
purchase.
Although expansion plans have
temporarily been put on hold, Lennick hopes that in 2010 some will
be resumed in line with the company’s long-term goal to increase
its market share in several key regions, namely the BRIC countries,
as well as maintaining its key role in the European market.
On the toes of the decision by MAN,
its parent, to acquire VW’s truck division in Brazil, Lennick’s
finance arm has plans to increase its stake in German-headquartered
Euro-Leasing. MAN Finance International has already acquired 25
percent of the trucks and trailers rental company, and Lennick said
that the long-term strategy could be for it to buy it in total
following the announced changes in lessee accounting.
“If there are going to be only
on-balance products, we would like to have an off-balance sheet
product to offer. MAN already has rental businesses in certain
areas, and we decided that that’s a side we want to expand once the
market changes,” he said.
Unlike many other captives, MAN
Finance in France recently obtained a banking licence. It has the
freedom to use that licence in other European countries, including
Germany.
In the depressed market, its clear
strategy now is to focus on building its relationships in the truck
and bus divisions – and to be ready to expand when the right time
comes.
