Back during my car dealer days as a finance manager in a Philadelphia Saturn dealership, I accepted the title of this post as the mantra for ‘getting done’ good people with less than stellar credit histories.
The gist of the tactic was to assume that the credit analyst and/or loan officer at the lending institution, with whom you had hopefully built a good relationship, had no information about the borrower other than the loan application and the credit bureau profile.
Typically, the reports were a nightmare.
Charge-offs. liens. Bankruptcies. Civil Judgments. Foreclosures. Repossessions.
In short, these people likely had no business looking for a car that couldn’t be bought in cash. But there were other people who fell on hard times, were taken advantage-of, or were just unlucky. Maybe it was a sickness, a layoff, or some other life changing event that financially handicapped the applicant. During the course of my conversation with the applicant, I’d tease out their story.
“What happened, what changed, and why won’t it happen again?”
At the same time, I’d make sure we had the applicant in the right car, gotten a sufficient down payment to provide equity and investment, and then I’d share that story with the credit analyst. If the analyst trusted me, and knew I had put together a loan that made sense, they’d stretch, but I had to convince them as to what changed and why it won’t happen again. Without the person’s narrative, they would be no more than a credit score, just a numerical summation of ‘what happened’.
In looking at General Motor’s Annual Report (and by extension the auto industry as a whole) especially with regard to any potential bailout, I think the same tactics should be employed.
What happened? Yes, domestic sales volume declined (while global sales are up). Why? Is it solely a domestic problem? Was it quality, or something else? What was happening with gasoline prices? Commodity prices? Cost of health costs? Consumer credit? What changes occurred regarding taxation and accounting practices? Is the cost of doing business globally more expensive than domestically? To what extent were losses driven by their financing operations and not their ‘core business’, manufacturing automobiles? Most importantly, what has changed? And post-bailout, why won’t it happen again?
Tags: bailout, cerberus, financials, General Motors, GM, GMAC
