THE DEFINITIVE TRUCKING SITE

February 2010

With the new year well under way and the promise of a global economic recovery pouring through the media, the question on local truck transporters’ collective mind right now is: “Will we be able to get finance for new vehicles?” For those fleet owners who received the cold shoulder from local finance houses in 2009, there is scant information forthcoming from said bankers regarding any easing of loan criteria in 2010 writes Paul Collings.

On the upside, local truck OEMs are expressing positive sentiments regarding access to finance on capital equipment. According to Casper Kruger, Vice President of Hino in South Africa: “It is important to recognise some extremely positive signs that have emerged in the business environment over the past month and which auger well for truck, bus and van sales in 2010.

“Firstly, business confidence, as reflected in the latest seasonally adjusted Kagiso Purchasing Managers’ Index, is on the rise with the most recent published results even suggesting that some workforce rebuilding is taking place. Evidence is emerging of increasing competition between financial institutions to forge partnerships with the commercial vehicle industry. The recent announcement that a major supplier, active across all classes of the goods vehicle spectrum, has elected to change its finance joint venture partner, is a case in point”.

Decision-making paralysis

He adds that the relatively poor January market result is more the product of short-term logistical limitations within the supply industry than a lack of demand.

“The perceived lift in the country’s business mood is a hopeful sign that some of the ‘decision-making paralysis’ that seemed to pervade local boardrooms during much of 2009 has now started to dissipate. With the everreducing time gap to the start of the 2010 FIFA World Cup in mid- June, this would be a most helpful development and it remains an urgent priority for fleet managers to initiate their procurement programmes without delay. In the final analysis, the broader signals evident thus far in 2010 do suggest that this year’s truck market can be expected to return some measure of growth over its immediate predecessor,”

The truck supplier alluded to by Kruger is Nissan Diesel South Africa, now called UD Trucks, which recently formed a joint venture with Wesbank after its JV with ABSA collapsed early last year. According to Johan Richards, chief executive officer of UD Trucks: “In an effort to enhance customers' access to vehicle finance, NDSA has launched UD Financial Services as part of a joint venture with WesBank. UD Financial Services will offer a range of products and services to our customers as part of our aim to provide a complete and convenient service throughout a vehicle's lifespan, which includes sales, vehicle financing, fleet planning, training, parts and service support. These vehicle financing products include instalment sales, financial and operating leases, financial rentals as well as full maintenance agreements.”

Reticence rules

Despite these positive assessments of the situation, the fact remains – bankers are still extremely reluctant to shoulder risk when it comes to commercial road transport. In fact, FleetWatch drafted a questionnaire and sent it to all the leading finance houses, including those owned by OEMs and surprisingly, received only two responses – one from MAN Financial Services, the other (after much ado), from Absa.

What is really astounding is that fleet operators urgently need information regarding the latest requirements of vehicle finance houses. The reluctance on the part of so many lenders to participate in this report clearly expresses a dire oversight and denial of a perfect opportunity to ‘address the market’.

All that being said, here are the questions and answers put to MAN Financial Services and Absa.

MAN steps up

FleetWatch: Will the drop in truck transport demand [and liquidation of many fleets] in 2009 result in a shortage of freight haulage services in 2010, especially during the soccer world cup?

Michael Kaiser, MD, MAN Financial Services: Liquidations occurred due to a declining demand for  transporters due to the closure of commodity industries. However, available haulage was there to cover demand. We cannot see any impact whatsoever on the Fifa World Cup.

FW: How do you foresee your organisation facilitating truck finance in 2010?

MK: It’s business as usual and as always, the strength of the client’s generated income and cash flow availability to service new debt will be the deciding factor.

FW: Will the stringent lending criteria imposed on fleet owners in 2009 continue or will they ease in 2010?

MK: That will depend on the development of bad debts and the further development of the SA economy. Nevertheless, we believe that there are fewer clouds on the horizon in 2010 than experienced in 2009 but a guarantee or commitment by the financier to ease lending criteria cannot be given at this stage.

FW: Uppermost in mind is the question of deposits on hire purchase agreements. Will these become more realistic (be cut from +20% of purchase price to around 10%)?

MK: Each application is being assessed on its own merit and therefore deposit requirements will vary but certainly not go away.

FW: What should fleet owners focus on in order to become more eligible for finance?

ABSA-lootly what?

FleetWatch: What reasons drove ABSA (and other leading local truck finance houses) to limit their financing of trucks in 2009?

William Mathee, Head of Commercial Asset Finance, Absa Business Banking: Absa, like other banks, experienced an increase in delinquencies in commercial asset finance in 2009. The major contributing factor was the downturn in the economy and the resulting effect on the transport industry.

FW: Why did Absa’s joint ventures with MAN and Nissan Diesel falter in 2009?

WM: Absa Joint Ventures did not fail. A strategic decision was taken to tighten lending criteria for commercial asset finance (including trucks) to ensure that the interest rate charged was commensurate with the risk of financing the asset. Absa has a strong alliance with MAN, which we want to build on in 2010.

FW: Will access to truck finance get any easier in 2010?

WM: Globally, economies seem to be improving and we also expect the trend to continue in South Africa. However, the improvement is only expected to manifest in the second quarter. Absa’s Commercial Asset Finance strategy will be determined by the state of the economy and the performance of the industry.

FW: What words of advice does Absa have for truck fleet owners in order to secure favourable finance packages in 2010?

WM: Absa will continue to finance trucks and commercial assets. We have a team of Relationship and Product Executives that can assist customers to structure a finance deal. It is, however, important to have a detailed business plan available in order for the bank to consider a financing package.

Rolling out

Plainly put, it’s all a bit murky out there in money-lending land, but, as the sages say, ‘the wheel turns’. By running a tight ship, operators will place themselves in the perfect position to call the shots when the proverbial shoe shifts to the other foot.

Michael Kaiser MD MAN Financial Services