In a significant move, the Bank of Montreal (BMO) has announced its exit from the retail auto finance business, as it aims to concentrate resources on areas where its competitive positioning is strongest. The decision was confirmed by BMO spokesperson Jeff Roman on Thursday, September 15, 2023.
The bank will cease making consumer vehicle loans but will continue to offer financing for dealers. "By winding down the indirect retail auto finance business, we have the ability to focus our resources on areas where we believe our competitive positioning is strongest," Roman elaborated in an email.
This decision follows BMO's acquisition of San Francisco-based Bank of the West in February and rounds of layoffs within the past year. The bank joins a list of other financial institutions, including Citizens Bank and Mechanics Bank, that have exited indirect auto lending to focus on more profitable business lines.
While the move will result in layoffs, the exact number remains undisclosed. However, Roman assured that the bank is working closely with affected employees to provide support and ensure they are treated with fairness and respect.
BMO and its American unit BMO Harris Bank have been offering auto loans to consumers through a broad range of dealers in both Canada and the U.S. Following this decision, BMO will fund all contracts approved before Friday, September 15, 2023 and will continue to operate its direct auto lending and floorplan lending businesses.
At the same time, the auto industry faces potential disruptions due to a strike launched by the United Auto Workers (UAW) against Detroit legacy manufacturers Ford Motor Co . (NYSE: F ), General Motors Co (NYSE: GM )., and Stellantis NV (NYSE: STLA ). The strike could result in a short supply of vehicles for these manufacturers, putting pressure on vehicle prices after they had been slowly recovering over the past year.
This industry shift comes amid ongoing inventory challenges faced by dealers and manufacturers due to pandemic-related shipping delays. However, tighter supply has led to elevated dealer profits, creating a new normal for supply levels going forward, according to a study from Kerrigan Advisors.
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