Captive finance

All automotive groups possess a captive finance subsidiary enabling them to finance some of their business activities, including loans to customers. For example, PSA has bank PSA Finance and General Motors, GMAC. These financial entities can manage up to 30% of vehicle purchases, but this differs depending on manufacturers and the market situation.

The recent financial crisis has reinforced the potential risks automotive groups can face such as:

Solvency of customers
Access to funding
Financing costs and its negative impact on margins

Banking activities and the automotive industry are extremely connected and one can have a major impact (positive and/or negative) on the other.

Mazars has a strong track record in both worlds and has dedicated specialists in audit and advisory who provide first-class solutions. Our clients appreciate the level of expertise, but also the unique approach and commitment of Mazars’ teams.

“The Team show good professionalism, high devotion to commitment and good communication with us”

Automotive Group, China, audit services

Challenge

Our client is an Automotive Group subsidiary in charge of the Group’s refinancing and liquidity management. It operates in 39 countries, primarily in Europe, Russia and South America. By financing more than a third of the sales of two car manufacturers, it is amongst the most competitive and efficient captive finance companies in the market.

As a bank, our client is subject to banking regulation that involves periodic and permanent controls not required for industrial groups. It thus has to provide the Prudential Supervisory Authority with a report, including liquidity monitoring. As this report is based on data from more than 20 subsidiaries, our client needed to implement an IT system and a control framework that could ensure the data's reliability.

Solution

“We now have an audit grid that allows us to perform efficient controls.”

Client

Mazars performed a liquidity ratio calculation (using the standard method). We set up test grids in order to validate data from the parent company and subsidiaries, as well as the data supply framework.

Impact

Mazars contributed to one of our client’s core missions: to ensure the profitability of invested capital as expected by the shareholders, while maintaining a high level of financial security for the Group. Mazars also performed a refunding function review for this client: liquidity risk, rate, monitoring, management control dedicated to the Group’s funding and pricing.