WHEELER CEO, VW FINANCIAL SERVICES
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Fred Crawley talks to the CEO of Volkswagen Financial
Services, Graham Wheeler, about brand strategy and
innovation.
Graham
Wheeler is a man who knows how to balance many priorities. After an
involved meeting with Volkswagen Financial Services’ head of IT
Gerhard Naegele and White Clark Group founder Dara Clarke, he
manages to find half an hour to discuss VWFS’ strategies for 2009,
before having to rush to his hotel room to prepare for an impending
industry dinner. .
Despite the demands on his time, he is concise and passionate
about setting the scene for VWFS over the next 12 months. Although
he is proud of the position he has put his business in – 2008 has
seen lending soar past £1bn months ahead of the same figure’s being
reached in 2007, and its fleet ranking move from 19th to 13th – he
is frank and pragmatic about the tough conditions ahead.
“2009 will be extremely difficult for us all,” he says before
anything else, speaking for VWFS and for the captive finance market
at large. “The recession will certainly reduce business
opportunity, and we will need to balance our costs accordingly. We
have high volumes of new contracts, and very high finance
penetration – but increasing levels of arrears, bad debt, and
vehicle returns.”
The fact that Wheeler is comfortable to begin an interview with
such a roster of challenges says a lot about his confidence in
VWFS’s ability to weather them. After all, he is no stranger to
hostile conditions. Whereas many asset finance MDs start their
careers in sales or back office roles, Wheeler began as a
collections manager for Provident Personal Credit in Glasgow, in
1982.
“Let’s just say collecting in Glasgow was character-building,
although generally the people I encountered had just fallen on bad
times,” Wheeler remembers. “Nevertheless, I really believe if you
want to be in the business of lending money, you need to know what
happens when you get it wrong.” Given that he learnt the workings
of the financing business in a climate like this, one would think
Wheeler could be the man to lead VWFS through the tribulations of
the deepening recession.
Eggs, baskets
One major strategy for VWFS’s continued prosperity, according to
Wheeler, is the spreading of risk across many areas of the
business: “Trading in such an environment is tough, and requires a
blend of products, services and campaigns. We are always reviewing
our range of products and propositions in order to minimise risk
and maximise performance.”
Along these lines, VWFS has followed in the footsteps of its
parent. Volkswagen Group as a manufacturer is known for its
prolific approach to unveiling new vehicles – 2008 alone has seen
the release of the Volkswagen Scirocco, Tiguan and Passat CC, plus
the Audi Q5, Skoda Superb and SEAT Ibiza. In addition, Volkswagen
are gearing themselves for the release of new Golf and Polo models
during 2009.
Within the sphere of finance provision, things are no quieter.
VWFS is engaged in an effort to take advantage of every possible
sales niche through offering a battery of finance products, and
during 2008 launched more than 75 finance campaigns.
Most recently, the company has been working on a system of
retail service plans, designed to “help retailers maximise their
revenue opportunities regardless of the economic downturn”, in
Wheeler’s words. The plans work by extending the value and
lifecycle of cars owned by customers who are delaying purchase
decisions, thus forging goodwill and making a Volkswagen Group
vehicle purchase more likely when the right time comes. This year
has also seen the launch of a used car service plan.
VWFS has championed the use of service-inclusive finance plans
since they were first introduced for the Skoda brand in 1997. At
the end of 2008’s first half, VWFS’s financial report showed a 258
per cent year-on-year rise in the value of service and maintenance
contracts signed. This was due in part to offers like the £209 per
month Transporter van plan, and subsequent equivalents for the
Caddy and Caddy Maxi vans.
Wheeler is also keen to stress the company’s continued emphasis
on insurance products, with a steadily growing motor insurance
portfolio and a ‘quote and buy’ website going online in the
immediate future. With so many financial products being offered,
says Wheeler, VWFS is well-placed to pick up revenue wherever
opportunity may lie, and equally well placed to survive major sales
hits in individual markets.
This risk spreading approach translates across to Volkswagen’s
fleet business in the UK, where VWFS leases and manages fleets of
anywhere between 1 and 400 vehicles. This focus variety extends
once again to financial products attached to the fleet business,
with the latest release being a Volkswagen Group Leasing fuel card
developed in conjunction with Arval.
Under one roof
The most visible spread of VWFS products across different
markets can be seen in the offering of finance across eight brands:
Volkswagen Passenger, Volkswagen Commercial Vehicles, Audi, SEAT,
Skoda, Bentley, Lamborghini and Bugatti. “Volkswagen Group,”
according to Wheeler, “has the largest and most diverse
cross-section of brand profiles in the industry”. Whereas each of
these brands operates as a different business in terms of sales and
marketing, they all benefit from economies of scale in using an
overarching finance and back office superstructure provided by
VWFS.
“Their approach to the market is different,” says Wheeler, “and
often they have different customer bases. We work with each brand
to manage a range of finance offers that promote the sale of their
cars, and that can range from financing a Lamborghini at half a
million to a few thousand on a used Polo. ”
Of course, the reverse side of this bounty of finance
opportunities is the fact that VWFS has such a large flock of
brands and financial product niches to tend to. With VWFS playing
it safe by operating so many different types of business, how does
it hold the whole edifice together?
Wheeler says the solution lies in close communications
between different aspects of the business, both within Financial
Services and within the larger context of the Volkswagen Group.
Talking about the relationship with Volkswagen Group as a
manufacturer, he explains: “We have developed a joint strategy
across three key areas – parts, car sales, and finance volumes. The
two companies together drive performance towards these common
goals.”
As part of this cooperation, he continues, Financial Services
has to be more than simply a money lender. “The philosophy of the
companies is also seen as being about ‘the brands creating the
dreams (i.e. the vehicles that customers want), and VWFS realising
them’. This relationship includes not just manufacturing and
financing arms, but importers, retailers and maintenance services
also.”
The road ahead
With future prosperity riding on the success of this intense
communications strategy, the importance of IT systems for VWFS
becomes abundantly clear. This is the reason for Wheeler’s meeting
with Dara Clarke: VWFS is currently working with White Clarke Group
to implement a new IT infrastructure which will eventually
interface with the Volkswagen Group’s vehicle ordering, logistics,
and customer management systems.
“Having a full view of our customer,” says Wheeler, “from the
point of vehicle order through to servicing, warranty work, the
overall customer experience, their finances, motor insurance, and
claim information will be essential in allowing us to provide the
service we need to deliver.”
At present, Wheeler is confident that 2008’s year-end results
will see VWFS ahead of 2007 in terms of volume across all areas of
reporting, but with defaults on the increase across the industry
and margins under pressure, profit is more difficult to
predict.
Certainly, 2009 will be a year of consolidation, with a major
emphasis on bedding in new systems, maximising process efficiency,
and using Volkswagen Group’s enormous spread of physical and
financial products to take advantage of all possible business
opportunities.
A recent staff engagement survey at VWFS’ headquarters in Milton
Keynes has shown morale to be extremely high among the company’s
450 staff, and Wheeler is sure that his organisation is in the
right frame of mind to deal with the worsening condition of the
automotive industry. When asked what he expects from VWFS over the
next 12 months, his answer is immediate: “Stability, growth and
commitment – commitment from brands, colleagues, retailers and
customers. By continuing to work together we can weather the storm
of 2009, and be best placed to take advantage of the inevitable
growth in 2010 and beyond.”
