POLARIS IS STEPPING up to assist its dealers find financing for customers in a tough credit environment, and the effort will likely cost the manufacturer millions of dollars.
Polaris has two providers for retail credit in the United States. GE Money Bank provides close-end installment consumer and commercial credit to customers for both Polaris and non-Polaris products, and HSBC Bank Nevada, National Association (HSBC) provides revolving retail credit financing under the Polaris StarCard private label credit card program.
HSBC last year informed Polaris that it wanted to tighten credit standards for its revolving retail credit offering. As a result, Polaris officials say they believe it necessary for the manufacturer forgo its volume-based fee income and/or absorb increased promotional support costs beginning this month to ensure that retail credit alternatives continue to be available for Polaris customers through HSBC. In other words, they'll have to subsidize what would be non-approved loans under the new HSBC standards.
Polaris officials say "the less favorable terms" imposed by HSBC as of March 1, 2008, combined with HSBC discontinuing the financing of non-Polaris products at dealerships as of July 1, 2007, likely will result in a significantly lower income generated from the HSBC and GE Bank retail credit agreement this business year.
Polaris generated $45.3 million of income from its Financial Services operation in 2007. Retail financing accounted for 62% of that business while wholesale credit represented 31% and other activities took in 7%. At this point, Polaris expects year-end income from its retail credit operations to be in the range of $5 to $10 million, down from an all-time high of $28.2 million in 2007.
Minnesota-based Polaris supplies 1,600 dealers in North America and 43 distributors and six subsidiaries in 130 countries. Polaris revenue in 2007 totaled $1.78 billion, up 7% from $1.66 billion in 2006.
Polaris' Income from HSBC and GE Bank Retail Credit Agreements
|2008||$5 to $10 million (company estimate)|