Sep 19, 2012
MAN Finance says default levels could rise in SA in 2013Back
Hannover|Absa|Europe|France|Germany|Italy|South Africa|Spain|Joachim Ewald|South Europe
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Speaking to Engineering News Online at the IAA Commercial Vehicles fair in Hannover, in Germany, on Wednesday, he said indications from the South African arm of MAN Finance over the “last two, three months” were that economic conditions across all truck-buying industries were deteriorating, with an increasing number of customers overdue on their payments.
Around 40% of MAN truck sales in South Africa were financed through MAN Finance, which operated in joint venture with Absa. South Africa was the third-biggest market within the MAN Finance portfolio.
Ewald noted that repossessions under South African legislation following payment defaults were “problematic” for MAN in Germany, as it could take more than a year to have the vehicle returned to the truck group. In Europe the process took around four months.
Ewald said around 1.5% of the South African MAN Finance book value was currently at default level, which was down from the previous level of 2% seen during the recession three to four years ago.
However, it appeared as if the default value could again rise to “1.7% to 1.8%”.
In Europe, the default level was by-and-large far below 1%, with Germany at 0.5%, and France at around 1%. The average worldwide was 0.8%.
However, South Europe was fast turning into the black sheep of the truck family, with default levels in the struggling Italian and Spanish economies at 5%, noted Ewald.
Some Italian cities, he said, were 360 days overdue on their bus payments.
“We are seeing many Italian municipalities running out of money. They are moving money around to make payments.”
Ewald said he was “not happy” about current default rates, including in South Africa, but added that he was “also not worried”.
“What is worrying is truck volumes. In Italy and Spain truck volumes are not even a third of what they were three, four years ago. The Spanish truck market is now smaller than the Belgian truck market.”
As Europe continued to struggle with high levels of debt, Ewald said the truck industry had to adapt to this new-look, smaller market.
“Will the markets recover? We hope they will, but we don’t know when.”
Ewald said MAN Finance was in a good position to ride out the storm, as the company and many of its customers had learned a few tough lessons during the global recession of 2008 and 2009.
“Our customers are more stable. Their businesses are more stable. They are able to accommodate a 5% to 10% reduction in their business and still survive.”
He added that MAN Finance was also promoting more flexibility among its customers, motivating them to, for example, buy only 80% of the trucks they required, and securing the other 20% in a short-term, flexible arrangement. Should business then slow significantly, operators can return the trucks they do not own.
Ewald said he was aware that not all industries could adopt this model, for example the mining industry, but that it could work for the distribution industry, for example.
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