DEARBORN, Mich. -- Ford Financial Services Group President Ken Whipple is like the man who has everything to smile about except his chipped tooth.

With car buying on the rise again, his Ford Motor Credit is having another record year. The division, which also includes Ford's consumer unit, Associates Corporation of North America, and its commercial .finance operation, USL Capital, earned a robust $1.6 billion in I993, up 54%from the previous year. That equaled about onethird of Ford's total profit.

But First Nationwide Bank is a reminder of the carmaker's disastrous foray into banking in 1985. The unit has been a drain on earnings, but it won't be Mr. Whipple's worry much longer. Ford will soon close a deal to sell the California thrift for $1.1 billion to Texas-based First Madison Bank.

Reflecting on nine rocky years of ownership, Mr. Whipple admits Ford badly miscalculated the savings and loan business and was too optimistic that regulation would be lifted.

In a wide-ranging interview at the automaker's global headquarters here, Mr. Whipple discussed the future of the $142 billion financial services division, one of the nation's largest

He sees plenty of expansion for everything from manufactured housing loans to fleet leasing.

He said the core business of auto lending and leasing, facing intense competition from banks, is moving increasingly toward the used car business.

He also sees Ford Motor Credit doing more financing of non-Ford vehicles, a move that will put the company in even greater competition with banks and credit unions.

Dallas-based Associates' growth by acquisition has been slowed by higher price expectations and Mr. Whipple blames Ford's conservatism for, at times, holding back San Francisco-based USL. He also says the future may include a push into investment products such as annuities.

Q.: Bankers generally see Ford Motor Credit and the other captives as an arm of marketing, with a determination to move metal at an unfair competitive advantage. Is that true?

WHIPPLE: No way. It doesn't happen like that. If somebody comes to us and says they want to do an innovative program, we'll say sure, but we have to make our margin just like any other supplier.

Q.: But you're not like any other supplier. You get a subsidy from Ford that e nables you to offer 4.9% financing that a bank can't touch.

WHIPPLE: It's still arm's length between the two operations. In the early 1980s we had a rebate, an incentive program - and all the banks used to do that. It was essentially coverage and capital capacity and once we got to the stage where we were big enough, we decided it was a great competitive advantage to move in and out of things like interest rate support programs against competition like banks.

Q.: But the perception is still there that you are here firstly to move cars o ff the lots and out of the factory.

WHIPPLE: It is very much a shared thing. Yes, its market support, but it's also about making financial objectives. A good example of that was our move into financing non-Fords. That was not effortless. We were kind of the last and the most once we moved. We moved after Chrysler and General Motors.

We had a lot of debates over several years. We made this decision that we would do it forever, you have to tell your dealers that. I think GM made a mistake in that when they got their credit rating lowered, they notified their nonGM dealers that they would have to find another wholesale source. The dealers are going to remember that for a long time.

Q.: How big are non-Ford products for you?

WHIPPLE: It's between $4 billion and $5-billion on about $90 billion, so it's not huge. But it will continue to grow.

The way we look at it on the captive side is what share of the Ford business are we taking and we are between 35% and 40%. That's about the high-water mark. Right now, because the banks are back in the business with a vengeance, it's around 36%. We still have a litter room to go up.

Q.: Is this competitive environment making it difficult for anybody to make money in auto financing?

WHIPPLE: Yeah, it's been tough. I think it will sort itself out. If you look b ack in history, you will find that during recovery periods there is an era of toughness . Banks have jumped back in just the last year in a big way. Some, I think, have come in a li ttle too aggressively.

Q.: Which banks are chasing your business?

WHIPPLE: NationsBank is as tough as anybody. They are excellent competitors ac ross the board. They are pretty much national, but we run into them more east of the Miss issippi River. There are strong regional banks like Banc One Corp., and Barnett Banks in Florid a.

It's still a great way to put on assets quickly. If the pattern repeats itself and some of them start to get big losses, they say wait a minute and then the margins start to tighten.

Q.: How far are we into the cycle you describe?

WHIPPLE: I don't know, but I hope we are about to come out of it. One thing I' ve noticed is that banks have not been raising certificate of deposit rates as much as the Fed[end Reserve Board] has been raising interest rates. That of course, creates an opportunity for them. That won't be forever. I think it's starting to go away now. But as we track it, I think we have seen the low point in March or May of this year.

The other thing that's helped is that everybody's [loan] losses, including ours, have been unusually low during this cycle. By and large, everyone has been very well behaved in paying their bills.

Q.: One issue going forward is that all the car leases threaten to glut the ma rket with used cars over the next few years. How will you deal with that?

WHIPPLE: To start with, the dealers have been even more eager for these two-ye ar old cars than we could have imagined. Before this, you couldn't manufacture twoyear cars. The dealers have said there is a terrific market out there. What we have done to try and support that is to move more aggressively into used car financing and leasing.

Q.: But as a growth area, there seems to be risk in that business.

WHIPPLE: It's a small area now, but it's going to grow. I don't think it has any more risk than new car leasing. There was a launching curve. If you look back in 1988 and 1989, everyone took big losses on used cars and we all had some learning to do on how you set residuals. I think everyone got more conservative on that.

Q.: Car financing is not your only business. With USL and Associates, there are few financial services you don't provide. What are you looking at?

WHIPPLE: We are a super-niche player. We are willing to get in aggressively to

logical extensions of businesses we are in now. Ford and non-Ford used car financings are examples. At the Associates, in their truck financing business, when the industry was in the doldrums for a number of years, they moved into truck trailers and into medium trucks. Their line did not go down even though the truck business did.

Q.: At Associates, in particular, you have made a lot of acquisitions to grow the company. Do you see that continuing?

WHIPPLE: We are in a situation now where the stock market valuations of some of these outfits are pretty high. Some people are starting to get the idea of an initial public offering rather than selling to the Associates. The prices are not attractive, but that will change again.

Q.: You don't really offer investment products. Do you see an opportunity there?

WHIPPLE: We're doing some experimenting with an annuity product at Ford Credit with the Ford name on it.

I'm real interested to see how this plays out; it could be an entry into the investment products area.

Q.: What is the outlook for USL?

WHIPPLE: They were in too many businesses. They have been consolidating into businesses where they believe they can make a decent return. They are looking for another business. It could be another area of specialized commercial financing.

Q.: What will you stay away from there?

WHIPPLE: We will be very modest in real estate, which is a small part of our t otal now. That is not going to be more than 8%-10% of that business, ever, whether it should be or not.

One of the restrictions on USEs growth has been our conservatism not only on credit requirements, but on risk exposures.

They have a whole list of things that say how much of the net worth is going to be in airplanes and construction equipment. That does cap us on growth.

Q.: There is a fourth aspect to your division - for a few more months, anyway - and that is First Nationwide. Why did you get into the thrift business in 1985 and what drove you out?

WHIPPLE: The thinking behind it was perfectly sound. Here was a business that technically we ought to be able to do. I think you could argue that we are one of the most efficient borrowers in the word. We also knew how to lend money and create volume in fairly largesized transactions. It was also more of a synergy idea than ever worked out. You had a business that for lots of reasons had an inexpensive source of funds. Here at Ford Credit we had, on the other hand, the ability to generate assets that ought to fit within [First Nationwide].

Q.: What was the reality?

WHIPPLE: It didn't turn out as we thought. [Laughter] Many of our assumptions were that there would be less regulation, that we would have a freer ability to do things. This didn't happen. Then it became less and less attractive. On the one hand you had solid companies like Ford Credit that could operate on its own with fairly high leverage and on the other hand you had pressure in the banking system to always have more capital. The difference is in return, and there was less eagerness on our part to go through the hassle. It didn't get easier to do business with ourselves, it became way more difficult.

Q.: Give me an example.

WHIPPLE: Everything we did was a real hassle. If you want to send some used fu rniture from a Ford division to First Nationwide - typically, within Ford we do this all the time, we transfer it at book value - well, hold the phone. You've got to get three bids and you have to prove you are doing it at arm's length. So screw it, we couldn't do it. If the Bush [Administration] package [on financial services] had gone through as we envisioned, there's a good chance we'd still be in there.

Q.: Be self-critical about your experience with First Nationwide.

WHIPPLE: I think we did blow the basic assumptions. We learned a long time ago

that you don't take a sick business and somehow apply the Ford management and make it into a healthy business. I think we are much more leery of a heavily regulated business. Maybe I was a little naive, I don't know.

Q.: At what point did you make the decision to get out?

WHIPPLE: It was a gradual realization that this thing was less of a strategic fit than we thought. We talked about some day divesting the operation, but that some day was probably about five years down the road. It was about a year ago that th e market for banks was improving and we started to get phone calls from people wanting to know if we would sell First Nationwide.

Q.: Is the sale price of $1.1 billion a good deal for Ford?

WHIPPLE: The way we look at it, it was exactly the goodwill, about $300 million, and the rest was our estimate of what the future losses were going to be for the piece that we left. It's a great deal for Ford. It's a way to get out of a business that was not a strategic fit. Historically, it will be a blip for us.

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