LOTS OF STARS, CARS - AND F&I FIRMS

Some of the nation's largest auto dealerships operate in Southern California. And it's the U.S. headquarters for many Asian automakers. Accordingly, Southern California, dubbed "Motown West" is also home to some major auto finance and insurance companies.

Here are some examples:

"Rose from the ashes" Hyundai Motor Finance Co. was a mess a couple of years ago. Parent company, Hyundai Motor America, watched its sales fall. The Korean financial crisis was full-blown. Money was tight.

Dismayed Hyundai dealers wondered what was going on.

"We more or less turned a cold shoulder to dealers. Our funding was limited and we didn't handle it well," says David G. Neuman, dealer services director at Hyundai Motor Finance based in Fountain Valley.

"Dealers had absolutely no reason to call us unless they had a complaint," he says.

Hyundai Motor Finance is seeing better days. Mr. Neuman credits much of that with the appointment of C.W. (Bill) Thaxton as president and CEO.

Troubleshooting new hires who take over an ailing firm often are at liberty to do things they wouldn't otherwise be able to do if all were fine.

Mr. Thaxton, in auto finance for more than 30 years, "got to set up shop the way he wanted to - and the first thing he did was go to dealers," says Mr. Neuman.

They worked out a plan. A main element of that consisted of allowing dealers to profit on every deal versus the manufacturer simply wanting to move the metal.

Mr. Thaxton says it was a team effort. Mr. Neuman says it was a miracle.

"We rose from the ashes," he says. "We're here to stay. Two years ago, I wouldn't have said that."

Female CPA heads WFS Joy Schaefer of WFS Financial in Irvine is in an unusual position.

For one thing, it's rare for a woman to head an auto finance company. She's the CEO at WFS. Also, while most F&I executives come from banking backgrounds, Ms. Schaefer is a certified public accountant.

"I've always like cars though," she says. She's held eight different positions at WFS in the last nine years.

She works closely with Tom Wolfe, WFS's president and COO.

"We work well together because I'm strong in accounting and he's got solid banking experience," says Ms. Schaefer.

Mr. Wolfe says that WFS recently did away with sharply defined, either-or lending categories for prime and non-prime, adding instead five levels of credit.

"The new setup gives dealers a better understanding of who we are," he says.

Originations of WFS auto loan contracts increased $148 million or 24% to $753 million for the first quarter compared to the same time a year ago. First quarter record earnings of $11.6 million contrasted to a net loss of $13.3 million for the same period last year.

Fewer credit losses and delinquencies result from stricter underwriting guidelines and the company's new credit scoring models, say executives.

Mr. Wolfe says speed of processing a loan application is important in these modern times, but accuracy of the credit information should rank higher.

"It's more important to look at the risk of the customer rather than just get a quick answer back," he says. "We want to get the right credit structure."

WFS is looking to operate mainly in the middle of prime and sub-prime market. A typical customer of that middle ground would be someone "with financial stability who doesn't want to put $5,000 down on a vehicle purchase," says Mr. Wolfe.

He says WFS uses new technology and automated loan processing "overlaid on good old common sense."

The firm does well in the West but is still working on higher name recognition in the East and Central regions of the nation, he says.

WFS has set up 22 regional offices on the premise that dealers want to deal with someone locally.

"If you are a North Carolina dealer, you want to deal with someone in North Carolina, not New York," says Mr. Wolfe.

Western Diversified goes on-line Western Diversified Services Inc. is using the Internet in a big way to conduct F&I business with dealerships.

"You'd be surprised how many dealers are using the Internet, says Western Diversified's National Sales Manager C. Alan Miller.

"Our initial misconception was that younger guys are the only ones interested in it," he says. "But a lot of older dealers are much more computer-savvy than we thought."

The company lives up to its name n it's a California firm, based in San Diego(although there's also a Chicago main office), and it's quite diversified.

Besides offering basic F&I services, it also offers F&I training with transferable college credits, customer follow-up surveys and a "MysteryBuyer" program in which ordinary people pose as dealership shoppers to test the services.

The firm is a subsidiary of Protective Life Corp., with nearly $11 billion in assets.

"We're trying to drive the company differently with the Internet and new software," says Mr. Miller.

That includes databases for F&I managers and access to F&I chat rooms and cyber-libraries.

A service contract transacted by computer can be done in one day versus several, says Mr. Miller. Not only does it take less time, it takes less dealership personnel because of less paperwork.

A challenge for Western Diversified is that although it's lined up all sorts of new Internet initiatives, not all its dealership customers are on-line. At least not yet.

Mr. Miller, who came up through the dealership ranks, describes dealers as the ultimate entrepreneurs.

"There are so many ways one can lose in a venture such as a dealership, and yet there are a lot of ways to make money, and those who succeed are great business people," he says.

Toyota Insurance sets records Toyota Motor Insurance Services Inc. (TMIS) in Torrence, is on a roll, says Joseph R. Corey, TMIS's national marketing manager. In May, Toyota's insurance arm sold 50,000 products, 29,000 of those extended service contracts. It was the best month ever for the company founded in the mid-1980s.

"This little company is setting all sorts of records," says Mr. Corey. "We make a lot of money for Toyota."

That's despite the fact that the firm is sometimes caught in this dilemma: TMIS research indicates many Toyota vehicle buyers pass on purchasing extended service packages because of Toyota's reputation for high reliability.

"That's not good for us, but it is good for the company," says Kelly J. Ramsay, TMIS's communications manager.

In such cases, TMIS reminds customers that they can enter into an extended service contract later, up until three years or 36,000 miles. Many people are not aware of that otherwise.

TMIS sells an array of products to consumers including credit insurance, G.A.P. protection and pre-paid maintenance.

It also sells services to dealers, including property and casualty insurance, medical benefit packages and team benefits.

Much of the firm's business is done in Southern California where 22% of the cars are Toyotas.

"Toyota and Honda are eating up the market here," says Mr. Corey. "Aggressive, not stupid"

"Know thyself," Will Shakespeare said in the 16th century, and Jack Fernandez of Triad Financial Corp. says today.

Triad's strength is that it knows its business, which is making car loans to people with spotty credit records.

Mr. Fernandez says, "Knowing we're in the risk business helps tremendously. We want to be aggressive but, at the end of the day, we want to be in business.

"Some lenders are willing to buy non-prime customers at rates that don't seem profitably logical. We want to make sure."

The payoff is that companies which make the higher risk loans - and know what they are doing - can make a lot of money on interest rates ranging from 12-20%.

Says, Mr. Fernandez, "This business is not about lending it out - that's easy. It's about managing your portfolios and collecting on your loans. We're in the spread business. If you don't know what you are doing it will drive you crazy. If you know what you're doing, it's fun."

Triad, based in Huntington Beach, has a new owner: Fairlane Credit LCC, the non-prime lending subsidiary of Ford Credit Co.

Mr. Fernandez believes Fairlane saw in Triad a lender that's "aggressive without being stupid."

"Ford wants us to grow dramatically," he says. "They want us to be the growth machine for the subprime market."

Triad works with 3,500 dealers in 33 states. It's a relationship business, according to Mr. Fernandez.

"At the end of the day, it's who the dealer likes best," he says.