The economic news for the first quarter of 2008 is notencouraging. The subprime mortgage crisis remains prominent, homevalues continue to trend downward, new housing starts are down, gasprices are soaring, consumer spending is down and consumerconfidence is ebbing.

The credit union industry is facing field of membershipchallenges from the banking industry in Utah and Kansas, andformidable bank lobbying efforts have delayed the CU RegulatoryRelief Act. Some credit unions are also struggling with an increasein home foreclosures and auto loan delinquencies, while loanactivity is decreasing. That drop in loan activity is far moreominous than short-term foreclosures and delinquencies.

Still, credit union executive teams remain charged with findinga balance between these outside factors and threats, whilecontinuing to serve their membership and foster growth. For ourindustry, the good news far outweighs the bad. While CUs are notimmune, due to both diversification in loan portfolios and ahistory of responsible lending practices, the impact for most isnegligible. Yes, some have gotten caught up in the real estatefrenzy; however, the majority of credit unions throughout thecountry remain fiscally sound and uniquely positioned to prosper inthese market conditions.

That is why it is puzzling why so many credit unions are overreacting to today's economic realities. We should be celebratingloss ratios that, although higher than usual, are the envy ofbanks. CUs should be acknowledging years of growth and stabilitywhile continuing to do a brisk business today. Credit unions arethe envy of every financial institution in the nation becausecredit unions are healthy, stable, have plenty of money to lend,and are a trusted destination for financial advice and services.The national and international financial markets may be in turmoil,but our local communities, small businesses and most loyal andresponsible members are eager to hear credit unions are open forbusiness.

Where is that message?

No doubt we've been spoiled by the prosperity of the pastdecade. Many CUs have seen their auto loan portfolios buoyed by theease and convenience of indirect lending programs that not onlyallow current members to close loans at the dealership, but alsoallow dealers to sign up new members. These loans usually havehigher loan-to-value ratios than direct credit union loans and thedealer has the opportunity to offer their products, not the creditunion's lower priced alternatives. These loans and members haveprovided many with a false sense of growth when CUs have known foryears that members acquired at the dealership have virtually norelationship with us.

In this increasingly competitive auto market, dealers are goingto offer financing to their customers through whatever sources thatwill help them maximize rate spread and profit on their aftermarketand insurance products. Thus, dealers are less likely to send newmembers and loans to credit unions.

With fewer auto loans to go around, and with the emphasis oncaptive financing, how do credit unions plan to compete? Creditunions need to reunite their core values and core competencies byproviding real value, superior service and competitive product toour most loyal (and current) members. We need to get back into thedirect auto lending business with a vengeance.

How do we get back on track? Here's a Top Ten list offavorites:

1. Management must focus on direct lending. The message comesfrom the top.

2. Find a way to reward your members service representatives onloan volume and sale of products.

3. Focus the marketing message, especially business developmentinitiatives, on our value story. Take GAP insurance. It costs under$100, most credit unions offer it for $150 to $300, and mostdealers charge $595.

4. Use relationship pricing.

5. Utilize an unbiased, nondealer new and used car buyingprogram that protects your direct auto loan and cross sells yourproducts.

6. Curb your indirect program to current members only, andplease don't offer a lower rate through the dealer than you offeryour members directly.

7. Go Green! Offer a discount on any hybrid vehicle or anyvehicle that gets better than 30 mpg. It speaks to all members,especially the 25 to 40 year old demographic.

8. Offer car buying seminars to first-time buyers, credit unionemployees and interested members.

9. Send pre-approval letters to qualified members with apersonal message from the CEO thanking them for their loyalty andmembership.

10. Schedule semiannual on-site car sales with a special ratefor that day only and have your direct car buying program organizeit. The members love one-price shopping with no haggling, nopressure and no sales personnel.

The majority of credit unions have ample financial resources toserve their current members and thrive by reaching out anddeveloping new and potentially long-term relationships. We need thehindsight and patience to return to what works and we need theforesight and courage to reach out to those that most need ourservices right now–our members and our local communities.

Bill Goldberg is president/CEO of AutoAdvisor Services LLCin Orlando, Fla., a credit union car buying program serving thesoutheastern United States. He also serves as a volunteer on thesupervisory committee of Martin FCU and has been affiliated withthe credit union industry since 1984. He can be reached [email protected] and
813-220-9123.