When banks merge, cutbacks usually follow. But an acquisition-minded Ford finance unit does it differently, focusing on preserving what made the takeover worthwhile.

DALLAS -- Reece A. Overcash Jr. is not a banker. But since he competes directly against banks, he straggles with a lot of the same issues, such as acquisitions.

Mr. Overcash is the chairman and CEO of Associates Corporation of North America, a very banklike consumer and commercial finance company. And like many banks, Associates has done a lot of acquiring in recent years: 18 companies and portfolios since 1989, adding $6.6 billion in receivables.

But as most banks take a centralized approach - integrating their acquisitions to extract the maximum cost savings, usually by closing offices and laying off employees - Mr. Overcash believes in leaving an acquired company pretty much as he found it. Most of Associates' recent purchases, at least on the consumer finance side of the company, have retained their original management, operational style, and even their own identity.

Cost cutting, says Mr. Overcash, "adds so little value compared to the maintenance of a culture. That's something all of us overlook."

Mr. Overcash's opinion may be heresy to some bankers. But he believes, based on internal studies, that Associates' hands-off treatment of acquisitions contributes substantially to its bottom line.

Something seems to be working. Last year, Associates reported its 19th consecutive annual increase in profits: 19% to $523.7 million.

Earnings for this year seem to be on track to do even better. The subsidiary of Ford Motor Co., which has $29.7 billion of assets, chalked up net income of $282.5 million in the first half, a 14% gain from the year-ago period.

"Any acquisitions they've made have augmented existing business lines. They've not gone off and purchased portfolios they had no experience in, which says they know what they're buying when they buy it," says Ann Maysek, a bond analyst with Donaldson, Lufkin & Jenrette in New York.

There is a downside to Mr. Overcash's approach: overlap and duplication in some markets. Dyersburg, Tenn., is a case in point. Located in the northwest comer of the state, this town has a population of only 16,000 but contains offices managed by three Associates subsidiaries that specialize in consumer finance: Associates Financial Services, First Family Financial Services, and Allied Finance Co.

Dyersburg also supports a branch of TransSouth Financial Services, an Associates' subsidiary that makes used-car loans. But Mr. Overcash is willing to tolerate a little overlap in order to retain the value he sees in the First Family and Allied Finance brand names. He is even considering letting future acquisitions keep their own data processing systems or outsource, rather than convert to Associates' system.

Two recent acquirees, First Family and Allied, have already been allowed to retain their old systems, which outsourced through Norwest Financial Inc. Mr. Overcash says each future acquisition will be looked at individually to decide whether to hook up to Associates' main system or outsource to Norwest or other vendors. "We can't do things like we've done them in the past," he says.

Mr. Overcash, a white-haired, softspoken North Carolinian, knows all about how things used to be done. He began his career in 1952 with Home Finance Group in Charlotte, which was purchased by Wachovia Corp., Winston-Salem, in 1970, the same year Mr. Overcash was appointed president.

"Reece was a very astute finance company executive," says Wachovia chairman John-G. Medlin Jr. "He did an excellent job of running the company while we owned it. He knows that business as well as anybody in the country."

Unfortunately, Wachovia's ownership of the subsidiary came under fire from the Justice Department, which felt that bank branches and consumer finance offices operating in the same cities gave Wachovia a monopoly market share in consumer and auto finance. Wachovia was forced to spin off American Credit as a separate company in 1976.

Mr. Overcash was gone by then. Associates, at that time a subsidiary of Gulf+Western Industries Inc., had hired him as president and chief operating officer the previous year.

Then based in South Bend, Ind., Associates had $1.9 billion in receivables. It was primarily a consumer finance company, with a small division that provided credit for the purchase of heavy duty tracks.

Mr. Overcash moved the company to the Sunbelt in 1976, buying formerly-vacant land in Dallas' Las Colinas business district, about midway between the city and the Dallas-Fort Worth airport. He also strengthened the commercial lending side of the company, which helped it weather the high interest rate environment of the early 1980s.

By the time Mr. Overcash was promoted to CEO in 1978, receivables had reached $2.7 billion. Sixteen years later, receivables have increased more than tenfold, to $29.7 billion, with most of that growth coming from acquisitions.

The company now employs 13,000 people in 1,433 U.S. branches. It also manages 280 offices in Japan, the United Kingdom, and Canada for other Ford subsidiaries.

The most dramatic event of Mr. Overcash's tenure was Associates' own purchase by Ford Motor Co. in 1989, for $3.35 billion.

Mr. Overcash knew he was playing in the big leagues when he stood by his window one day and watched the Ford team arrive to examine Associates' books.

"I counted," he recalls, "over 100 guys with briefcases getting off the buses. I thought, 'Oh my God.'"

Although initially intimidating, the Ford bear hug proved to be friendly. During the past five years, Associates has engineered 18 acquisitions of more than $100 million in size and still managed to maintain a double-A bond rating with every agency except Moody's.

"Not one time has there ever been a hiccup in Ford's support of us through the contribution of capital," Mr. Overcash says.

Moody's downgraded Associates from AA3 to A1 in September 1991, citing concerns about aggressive asset growth and increased leverage. Standard & Poor's maintains a higher AA- on Associates' senior long-term debt Fitch, Duff & Phelps, and Thomson BankWatch also post double-A ratings on Associates, which is higher than most other major finance companies and higher even than Ford, its parent company.

"They've been able to hold on to their ratings because they've been able to demonstrate extremely strong asset quality," both in the consumer and commercial portfolios, says Joseph Labriola, a bond analyst with Kidder, Peabody & Co.

With net credit losses as a percentage of average net receivables below the 2% level for the last several quarters, Associates' credit profile ranks among the best in its industry. The unit's reserves are also formidable, covering two times net losses, compared with the industry standard of 1.4 times.

"The Associates has a long history of not goofing up, of not doing something that gets them in trouble. That gives people an extra level of confidence in their conservatism," says PaineWebber bond analyst Daniel Travers.

As pan of Ford Financial Services Group, Associates functions as a "sister company" to Ford Motor Credit Co. and United States Leasing International Inc. "It helps balance out the cyclical part of the car company's earnings," says Kenneth Whipple, Ford Financial's president in Detroit.

Mr. Whipple, who led the due diligence team that so impressed Mr. Overcash, says Associates has done "consistently better than our projections."

The main question for the future is: Can Associates keep up the pace? Mr. Overcash admits there will be fewer acquisition opportunities in the second half of the 1990's because the current era 'of relatively low interest rates has boosted the profitability of finance companies and made them less interested in selling.

There is also the succession issue, although Mr. Overcash is still vigorous at 68 and longevity runs in his family: his father just turned 90.

Mr. Whipple says Associates, like Ford, goes through an annual planning exercise that requires at least four potential candidates be available for each top executive post. Likely contenders for Mr. Overcash's job at Associates include ,president and chief operating. officer Keith W. Hughes, a former banker with Crocker National in San Francisco, and two vice chairmen: Harold D. Marshall, who runs commercial finance and leasing; and Joseph M. McQuillan, head of consumer financial services.

Mr. Whipple considers it "extremely unlikely" Ford would search for Mr. Overcash's replacement outside the Associates. "I don't want to see Reece go, but I'm not worried we're going to lose a half a step in Associates' progress when he does decide to go," he says.

'We Consider Banks a Major Competitor'

Associates Corporation of North America has always competed toe-to-toe with banks, particularly in the areas of consumer finance and large truck financing. "We consider banks to be a major competitor every morning that we come into the office," says chairman and CEO Reece A. Overcash Jr.

That competition is likely to grow more fierce as banks rebound from their credit-quality and capital problems of the early 1990s. For its part, Associates continues to muscle into markets where banks are active, such as credit cards, Small Business Administration loans, and factoring. It already has a home-equity product that provides a rebate for the purchase of Ford vehicles.

In credit cards, Associates now has $3.1 billion in receivables, spurred by recent deals such as the purchase of Great Western Financial Corp.'s $222 million portfolio last September. Another source of growth has been co-branding deals with Amoco Oil, Ford Motor Co., GTE, and Unocal Corp.

The Dallas-based consumer and commercial finance company will pick up another $400 million in card receivables this month when it closes a deal to manage Amoco's private-label operation. And Mr. Overcash promises more to come.

"That's a core business for us," he says. "Without question, we're going to be a major player in credit cards."

Having held an inactive Small Business Administration lending license for many years, Associates now plans to use it. It recently hired Robert J. Rhinesmith, formerly a senior vice president with AT&T Capital Corp., to open an SBA lending office in Dallas and then expand that operation de novo or by acquisition.

And last month, Associates formed a joint venture company with Heller Financial Inc. to provide factoring services to the trucking industry. The new company, called Associates Transcapital Services, will provide Heller's factoring expertise to Associates' huge trucking client base.

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