What about MIC, the insurance division that houses GMPP and the smaller independent service contract programs owned by Ally/GMAC?

As events unfold, this topic is yet to come up in discussions.  After reading an article in Automotive News concerning GM and Ally, I contacted the author, Donna Harris, and asked her take on the subject.  Our email exchange follows:

From: Tom Luzader <tomluzader@dealershipincomedevelopment.com>
To: <dharris@crain.com>
Subject: Ally/GMAC and GMPP/MIC
Date: Wed, 11 Aug 2010 16:39:28 -0700

Why is it that no-one is talking about GMPP and MIC in all of these discussions about GM and Ally? If Ally is going to do an IPO how are they going to lure investor with a B rated insurance company as part of the package?

–
Tom Luzader
Dealership Income Development
office 602-395-5555
cell 602-821-6888

donnaharris@juno.com to me

You raise a good point, but as Ally’s debt ratings head toward investment grade wouldn’t it take the insurance company with it? Ford Credit’s insurance company also dipped into the B or B+ range. A few years ago, these finance companies wouldn’t finance a service contract that was backed by an insurer with anything less than an A- rating. I asked Ford Credit about that–so are you financing your own service plans these days–and got an irritated response that they know their own program is solid.
So are you an industry consultant?
Thanks for your interest and feedback.
Donna Harris

tomluzader to donnaharris

To answer the question in the last sentence, yes. I assist dealers in setting up participation plans for their service contract programs, both domestically and offshore.

Your analogy to the Ford situation is only partially accurate. ESP at the time was a wholly owned subsidiary of Ford. The current situation with Ally/GMAC is much different. GM is a minority owner of Ally/GMAC. MIC is carrying a large amount of risk and is on the watch list at most rating agencies. What interests me is that Ally now know that they will not be purchased by GM and is actually competing with a favored lender for GM dealer business. This just seem to me to potentially place the MIC relationship in at times an adversarial relationship with GM dealers. This could manifest itself into a higher percentage of audits, etc. if Ally needs to increase premium to offset losses.

No-one knows how this will play out, but the GMPP book of business has to be important to GM, or maybe not. Would they, GM, consider walking away from that risk and starting a new relationship with a new service contract provider? (FUD….fear uncertainty and doubt) Loyalty seems to be wavering for both dealers and the manufactures. It is an interesting time to be inside of this business.

I love this business.

She stated that FICO shows 25.5% of consumers (43.4 million people) have a credit score of 599 or lower, which makes them a poor credit risk for lenders.  In the past, only 25.5 million fell below 599 according to Myfico.com.  Down roughly 5.3 million people, those in the moderate range (between 650 and 699) are finding financing options, but are also finding it difficult to obtain the more affordable loans once available.  Above the historical records, the number of consumers with an 800 score or better has increased due to consumers cutting spending and paying off debt due to the recession.

Because of the restricted access to credit, as we in the automotive industry well know, the economy is slow to recover.  Ms. Connelly notes that since unemployment is at it’s highest levels since most of us can remember and with record foreclosures, this can cut 150 points off an individual score.

Because it takes years to improve an individual credit score, consumers and dealers have to change the way they look at securing financing for vehicle loans.  Higher interest rates and more cash down are now the norm when negotiating the sale.

The pendulum has swung from one extreme to the next when it comes to lending practice.  Being aggressive and creative are the new standard operating procedures as automotive dealers look for innovative ways to sell more vehicles and better serve consumers.

To read the complete article by E.A. Connelly, visit azcentral.com.

With all this talk regarding jobs, its no coincidence that I came across a speech that referenced a “Ted Talk” given by Mike Rowe, host of Discovery Channel’s Dirty Jobs and narrator of their show Deadliest Catch.  In his speech, Mike Rowe states that he believes a war has been declared on work, specifically blue collar jobs in America and explains why.  He’s very convincing.

I was always encouraged by my parents to “get an education so you can have a nice office job” and have admittedly said almost the same thing to my kids, but aren’t the blue collar jobs the backbone of America?  Specifically in the auto industry, where would we be if there were no one to make the relays, switches, panels, tires, etc. we need to build the vehicles we so depend on for our livelihood?

Here’s Mike Rowe celebrating work. As I said earlier, he’s very convincing, but he’s also very entertaining. Enjoy.

Many of the rules or “required procedures” in The Red Flags Rule are gathered from various states and federal laws already in place.  The FTC’s Red Flags Rule basically just assigns already existing regulations to entities not listed in the originating ordinance or rule.  Meaning that while federal enforcement has been pushed back, local enforcement has not.

The rule is 256 pages of legalease and difficult to interpret.  Many people have very little knowledge of what to do and when to do it.  For example, recently a finance director asked me about documentation on a cash deal necessary for compliance with the up and coming FTC regulations.  Red Flags does not encompass cash deals; only transactions with more than one scheduled payment fall under The Red Flags Rule.

The short story here is that we are under The Red Flags Rule and should be utilizing this time to hone the policies and procedures under which everyone will have to operate someday.  DID recommends that you spend a few minutes to review some of the information available concerning The Red Flags Rule.  Two links that we have found especially helpful are:

http://www.ftc.gov/redflagsrule and http://www.afip.com

If you would like to discuss compliance with The Red Flags Rule please contact our office at 602.395.5555 or send us an email from the contact page.

Some benefits of e-business include:

• simplifying the rating process for finance professionals
• reducing errors that lead to cancellations
• ability by finance and business office to edit business before remitting

For more information on e-business please contact us from the contact page or via phone at 602.395.5555.

CRM (customer relationship management) applications account for:

• revenue increases of up to 41% per sales person
• decreased sales cycles of over 24%
• lead conversion rate improvements of over 300%
• customer retention improvements of 27%
• decreased sales and marketing costs of 23%
• improved profit margins of over 2%

There are many advantages and functionality of CRM applications  including account management, contact management, marketing campaign management, sales leads/opportunities and sales management.

Every company is different and has different needs so when working with a CRM implementation company, consider what types of reports would benefit you.  For example, sales margin per sale, sales pipelines, etc.

For more information on how you can implement a CRM system in your dealership, please contact us at 602.395.5555 or send an email from the contact page.

With DID, this is an element of doing business that you don’t have to worry about.  Before we begin discussions with you on how to improve performance and profitability, we present you with a confidentiality agreement.  This confidentiality agreement ensures you that the information you share with us will go no further than us, unless approved or requested by you, the dealer.

We want you to see us as an asset to your team, not as a risk or a liability.  Trust and integrity are job requirements for our staff and in our client relationships; so much so that we put it in writing.

We value the opportunity to do business with you.

Visit our resources page to view our confidentiality agreement.

We all know not to perform any repairs to a vehicle with a service contract until we get the authorization from the service contract provider.  Why not treat these other products the same way?  In fact, its our experience that claims are paid more quickly and customers are much happier when this rule of thumb is followed because there are no administrative hiccups – unnecessary problems are averted.

We can make it even easier.  Our online claims filing will eliminate the need for a phone call, which is especially helpful when calling cities with a time zone other than ours (the east cost is thre hours ahead of us, the central United States is two hours ahead).  Online claims allows you to upload claim information and generates an approval code automatically based on coverage and term selected on the contract submitted to the administrator.

For more information on non-vehicle service contract claim procedures, visit our resources page and review the document entitled, “Procedures for a Non-VSC and Non-GAP claim.”

For more information regarding online claims filing, please visit our contact page to send your questions or contact us via phone at 602.395.5555.