This June, Chris Sutton was appointed managing director of Black
Horse Motor & Leisure Finance, a subsidiary of Lloyds TSB Asset
Finance Division. Sutton’s appointment, from a career in banking,
raised some eyebrows – especially in a motor finance industry which
likes to believe that only staff who have cut their eyeteeth
successfully trawling dealers’ showrooms for back-door business can
fully understand the sector.
Furthermore, he joined at a time when all lenders’ notions of
consistent growth and ever-growing market share were facing
revision in the light of the credit crisis. Black Horse, which had
been built up into the largest UK motor lender under the ambitious
auspices of Phil Stones in the early 2000s, was, like all other
motor lenders, due for a re-think.
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Sutton, however, strongly disputes the validity of criticism of
his lack of experience in the sector. In fact he sees it as a
strength. “It is actually an advantage,” he stresses. “When I
joined there were many very experienced people in senior positions
around me that knew the industry well and how it operates. However,
I came with a fresh pair of eyes and was able to question and
challenge all the basic tenets of the sector.
“I brought no industry ‘baggage’ with me – but I did bring an
experience of business and industry that is extensive. Furthermore,
I have been in sales and sale management roles in every way as
competitive and combative as the motor lending sector,” he
adds.
Sutton also disputes the old myth that banks do not know how to
sell. “There are not many differences nowadays between a bank and a
finance company in the way they actively market and sell their
finance products. Lloyds TSB, for example, has well over one
hundred products to sell to its customers. The finance company,
however, has far fewer products than that – and in many ways they
are less complex.”
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By GlobalDataIn June 2008 Sutton, at the time managing director of expatriate
banking at Lloyds TSB’s International Banking business (see box),
received a call to tender for his current job from David Oldfield,
who was his previous boss at Offshore Banking and who has been
managing director of the bank’s Asset Finance division since
November 2006. He applied and received the appointment.
Once in his new job Sutton began to realise the scale of the
challenge ahead. “It was obvious,” he says, “that the general
economy was showing some signs of problems ahead. It also seemed to
me that the motor finance industry had been going through a cycle
where the real profits to be made had been unfavourably skewed
towards motor dealers rather than the finance providers – despite
the amount of capital that the bank needed on its balance sheet to
support what is essentially an asset-management business. At the
same time penetration of finance at the point-of-sale [PoS] had
been deteriorating consistently.”
When Oldfield was appointed to the Asset Finance division,
Sutton explains, the business had grown significantly through a
series of mergers and acquisitions. Oldfield rationalised many
aspects, including tightening up the back office functions and
disposing of non-essential non-core businesses such as the Dutton
Forshaw motor group. “The result was an improving of efficiency,
especially on the support side,” Sutton says.
In addition, during John Woolley’s tenure at the head of Black
Horse, from 2006 to 2007, the company successfully piloted a
rate-for-risk programme which more closely links customers’ rates
to their risk profile. This tied in with the lender’s LetsUConnect
dealer finance system which was launched in late 2006 and which
gives dealers total control over every aspect of their finance
business, making accessing and processing of information far
simpler than before – and less vulnerable to fraud. The system went
on to win the “Innovation Award” at the 2007 Motor Trader Awards in
London.
Working hand in hand
“We are very good at working hand in hand with our dealers,”
Sutton explains, “and helping them increase their penetration at
the PoS. Some dealers want a close working partnership with online
access and regular meetings. Others, with perhaps lower volumes of
business, require a less close relationship.”
Sutton is dedicated to the concept of PoS finance and cites the
recent rise in volumes being achieved nationally as a result of the
credit crisis and the consequent withdrawal of the direct lenders
from the sector.
He says: “Traditional and internet lenders have become much more
cautious, or have pulled out of the market altogether and as a
result potential customers are actively exploring other options at
dealer PoS. It’s this potential that gives me a great sense of
optimism about a market that’s being continually talked down. In
reality, we are seeing a resurgence in PoS finance.”
Sutton also believes lenders should be promoting the many
customer benefits of PoS finance more aggressively. “Apart from
offering an extra credit line for dealers’ customers, there are
many products, such as warranties, GAP and PPI which can provide
specific benefits and profit opportunities for dealers.”
He stresses: “Those dealers that survive the economic downturn
will be those that are pro-active with selling PoS finance and are
focused on customer relationship management strategies.”
Nor does he believe that the British obsession with car ownership
will necessarily prevail for ever. “Younger people,” he says, “are
already giving signals that they do not need title to their car.
This is leading to increased use of personal contract purchase
plans and the like.”
A clear way forward
The voluntary termination of hire purchase agreements – for long
a financial thorn in the side of motor lenders – is showing no
signs of disappearing. Sutton contends that given the increasing
pressure on car sales staff to sell cars in a looming recession,
the uncertain position of used-car residual values and recent
changes to the Consumer Credit Act which came into effect on
October 1 2008, the problem may actually increase in the near
future. “Lenders are now required to provide borrowers with much
more information about their accounts, such as an annual statement
and regular notices when consumers fall into arrears or incur a
default sum. This extra transparency could well come with a
cost.”
Black Horse currently writes around 20 per cent of new cars on
its book, with the remainder used vehicles. Sutton argues that, as
a result, an independent like Black Horse can successfully live
alongside captive competitors whose prime objective is the
promotion of subvented deals provided by the manufacturers.
Team structure
Sutton has made a few changes to his senior management structure
since joining. “The way the team was structured was not appropriate
for the way I wanted to take the business forward,” he explains.
“The key areas of priority had become rather unclear – probably as
a result of recent acquisitions. We reduced the regional sales
offices from three to two and gave Bill Hamer responsibility for
both motorcycle and caravan business. With a definite focus on the
dealers, there have been no reductions in field-based staff.”
Contrary to the business models employed by some of its
competitors, Sutton is determined that Black Horse will continue to
have separate dedicated sales teams looking after the caravan,
motor and motorcycle businesses, “where the philosophy of
understanding these markets and working closely with our dealers to
add further value has never been so important.”
He is very clear about the way forward for Black Horse. “I am
not particularly interested in market share or new business volumes
being our principal drivers. New business volume in 2008 will
definitely be down on 2007 – but volume is no longer our main
objective; instead, profit is. I am quite prepared to walk away
from a deal that does not yield us sufficient margin. In the same
way, motor dealers need to convince their customers that the days
of cheap rates are gone. The price of credit has risen and good
sales executives will be able to convince their customers of that
fact.”
Sutton’s lack of close experience in the motor finance sector
could well prove of significant advantage in the challenges ahead,
especially when the shake-out of old customs and traditions, so
prevalent in the industry in the past, become essential as part of
the survival strategy for motor lenders.
CHRIS SUTTON: CV
Professional
Sutton was brought up in Yorkshire and went to school in
Barnsley. After sixth form he joined Midland Bank as a junior and
served for some 10 years in branches throughout the Yorkshire,
Nottinghamshire and Lincolnshire regions.
In 1987 he joined the TSB, working his way up to the area
director’s post at Manchester in 2000. He then joined the bank’s
private banking division as network director of its UK Wealth
Management operation and assumed responsibility for its 30 UK
private banking branches. This led to him heading up the bank’s
offshore-based expatriate banking business with branches in Dubai,
Hong Kong, South Africa and the US. He oversaw the opening of three
offices in the US as well as South Africa and Gibraltar and at the
end employed a staff complement of around 450.
Personal
Despite living in Edinburgh with his partner Michelle and his
three-year-old son, Sutton remains a fan of Barnsley FC and gets to
as many matches as he can manage. This, notwithstanding the fact
that his 17-year-old daughter is a Sheffield United supporter. (His
daughter may be onto a better bet here – since her team is
significantly higher in the Championship Division than his.)
A keen sportsman, he took up golf some two years ago and
whenever possible he utilises Black Horse’s gym facilities in the
Edinburgh, Cardiff and Cockfosters offices. He also likes overseas
travel of the adventurous kind and has trekked in Nepal, and South
America.
