Autoland Morphs Under Weight of Downturn
When Jeffry Martin took the helm of Autoland Inc. 18 months ago, some hard decisions had to be made if the company wanted to expand on its 35-year reputation of vehicle purchasing and financing services to credit unions.
That was April 2010. Today, the Chatsworth, Calif.-based Autoland has 170 credit unions participating in sales and at the end of last year, it reached the $1.7 billion sales mark, according to Marcia Francisco, senior vice president of marketing and business development.
In November, the company is scheduled to move up the coast to serve the Washington market and plans to build its presence even more through league and credit union associations.
This, as Autoland celebrates its 40th anniversary this year.
“We took a look at the landscape to see how we could better serve the credit union movement. We needed to do it naturally,” said Martin, president of Autoland. “Let’s stick to our core competency. We’re about loans, not cars.”
Autoland’s roots goes back to 1971 with a vision of providing auto buying services. Within a few years of launch, the company said it had attracted hundreds of credit unions. The momentum continued when Autoland hosted its first one-day used car show and sale in 1984.
Six years later, another milestone occurred when the firm opened its first office in a credit union in 1990. Five offices grew to 50 over the next three years. In the mid-1990s, Autoland added a pre-owned car locating service and went online to expand its virtual presence through the Web and credit union kiosks.
In 2007, Autoland further cemented its foundation within the industry by becoming a credit union-owned entity. Today, its California owners are the $347 million Telesis Community CU, Chatsworth; the $3.4 billion Kinecta FCU, Manhattan Beach; and the $29 million California Agribusiness CU, Buena Park.
Autoland made more changes under Martin’s watch, many of them fueled by a sluggish downturn. The executive said over the last few years, credit unions were internally focused on getting their houses in order. Autoland did the same, he noted.
“We were built to deliver 1,000 cars a month. When the economy took a hit, we had to make some financial decisions that involved looking at all facets of our business,” Martin said.
For one, after assessing its markets, the company departed from those that were not profitable but left the door open to return after a recovery. Indeed, that was the case with the $618 million CoastHills Federal Credit Union based in Lompoc, Calif. Martin said Autoland left the area but has since come back. Generally, the more remote markets that were especially hammered by the economy were among the first on the chopping block.
“We wanted to create efficiencies internally to make sure the money was in the right place and also to build back out to those markets,” Martin said. “We wanted to make sure of every dollar we used to build our credit union business.”
Autoland created a direct loan delivery channel partly in response to the challenges some credit unions experienced with their indirect lending programs, Martin said. Because of losses incurred over the past few years, credit policies have tightened, he added and the indirect aftermath remains a challenge for the industry.
Martin, a 20-year lending veteran with experience in the indirect sector, said credit unions wanted to play in the top-tier A credit arena. It’s a very competitive area especially since manufacturers and larger banks tend to make it difficult for credit unions to compete there, he noted.
Being in the top tier credit sphere pushed credit unions into the used car market, Martin said. As a result, Autoland grew that segment with its new to used car ratio going from 80%-20% to 60%-40%, respectively. The industry’s sweet spot used to be B paper but more credit unions are moving away, which Martin said he understands why.
“Competitively, there may be some challenges here with building loan portfolios,” Martin said. “We work very carefully with credit unions on the credit side so that they know what to expect going into the marketplace and how to deliver.”
Autoland had a misstep last year when the Oregon Department of Consumer and Business Services Insurance Division discovered a license lapse. The regulator said the company was not licensed in Oregon as a business entity insurance producer from Nov. 1, 2004 to March 11, 2010. The lapse was found in a 2009 audit by Autoland, Francisco said. After paying a $50,000 civil penalty, the Oregon regulator confirmed that Autoland was back in good standing.
Meanwhile, the $2.1 billion Mission Federal Credit Union in San Diego has been with Autoland for 10 years, said Debra Schwartz, president/CEO, adding over that time period, the company has seen its auto loan portfolio grow. In 2010, the credit union had approximately $8 million in auto loans generated through Autoland, and through August 2011, had already generated more than $6 million in new auto loans.
“Auto lending is a key strength for most credit unions including Mission Fed,” Schwartz said. “We have always enjoyed and appreciated our strong partnership with Autoland. They know credit unions intimately, and most importantly they understand the value of providing great service to our members.”
When Martin became president of Autoland, another decision was to have a best practices document in place, Francisco said. Martin said the first concern was that the company’s credit unions did not have specific goals for Autoland’s services. He considers goals to be a pivotal step to loan portfolio success.
The best practices document also contained strategic marketing plans tailored to each credit union. In place since last year, Francisco said Autoland saw an immediate impact through 20 new partnerships aided by the company’s business development plans.
“We want credit unions to provide excellent member service, be profitable and drive loan volume,” Francisco said.
Autoland is also moving forward with a mission to help those in need. Earlier this year, the company said for each vehicle purchased through April 30, it would donate a portion to assist victims of the tsunami and earthquake that occurred in Japan in March. The per vehicle contribution equated to 7% of profit and was sent to the American Red Cross, Francisco said.
Over the summer, a member of Eagle Community Credit Union in Lake Forest, Calif. won a 2011 Nissan Sentra through an Autoland sweepstakes.
“One of the biggest things we want to do more of is giving back,” Francisco said.
The myriad initiatives in motion at Autoland were most likely possible because Martin wasn’t the new guy on the block when he became head of the company. Prior to his current role, he had been an executive vice president for four and a half years at Autoland.
“I’m blessed with a senior management team that has a significant amount of experience,” Martin said. “As autos go, so goes credit unions. We have a high retention rate with loans and credit unions have embraced what we have to offer.”