Alan Leesmith, a partner at The Alta Group, a consultancy,
discussed changes in the market for captive finance and its
implications on lessors and their vendor finance strategies.
Notably, the audience was reminded of the growing sophistication
of captives where better focus and strategies on their part may
gradually grow to displace third party vendor programmes.
This happens when a manufacturer recognises captive profit
potential and wishes to capitalise value on leasing opportunities
instead of outsourcing them.
While captives may not have all the advantages of financial
institutions on their side, with finance not being their core
competence, Leesmith pointed out several successful captives, such
as John Deere Credit, Caterpillar Finance and Scania Financial
Services, as having grown to become “real businesses of substance”,
contributing commendable returns and adding value to their
respective parent companies.
Indeed, this notion was later reinforced during the latter part
of the day when Beatrice Kosowki, director of IBM Global Financial
Services, took to the stage.
In her presentation of the strategy IBM GFS has taken in recent
years, Kosowski said that far from being just a sales-support unit,
the division has been expected to grow like any other branch within
IBM. To achieve this it has certainly had to expand its role beyond
being a captive finance arm of IBM.
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With vendor finance increasingly viewed as a strong and
profitable sales-support tool, so too will the number of captives
proliferate. The case for this grows as manufacturers expand their
global supply chain. Eventually, successful captives may grow to
become successful spinoffs – either sold by their parent to realise
value or they become a third party lessor – and become formidable
challengers to finance companies themselves.